Policy reforms on how Australians spend their superannuation could boost retirement incomes by $397 billion by 2050, according to research by the Financial Services Council (FSC).
In FSC research conducted by NMG Consulting, it found a more efficient method of super drawdown would raise retirement standards, reduce bequests and take long-term pressure off the federal budget.
The roadmap produced drew on global approaches to the retirement system and identified three areas for reform:
- To help people see and use super as primarily for spending during retirement, including making safe financial advice more affordable and changing consumer disclosure rules to have a more drawdown focus;
- To remove regulatory barriers to innovative, new retirement income products, including facilitating a simple process for moving consumers out of closed legacy products, reviewing the flexibility of prudential capital requirements and introducing a disclosure regime to allow consumers to easily compare retirement product features and fees; and
- To help people take control of their superannuation by simplifying how it interacts with other parts of the retirement system like the aged pension, aged care and health care.
Around 100,000 more people would draw down, on average, an extra $10,000 in increased retirement incomes per individual every year, the FSC said.
FSC chief executive Blake Briggs said: “FSC research has demonstrated how we can optimise the superannuation system to allow Australian retirees to confidently draw down $397 billion more in retirement income by 2050.
“A retirement system that is designed around the needs of retirees, providing them [with] the products and advice they need at retirement, and encouraging them to enjoy their savings in retirement, will enhance the long-term sustainability of the superannuation system and take pressure off future tax settings.
“The FSC’s research shows that if our road map was implemented, annual benefits paid out by superannuation as retirement income would be 10 per cent higher each year, increasing to $38 billion more per annum by 2050. The higher income paid to retirees would total $397 billion by 2050, when compared to current policy settings.”
