The Government may need to utilise a number of the policy levers at its disposal to deal with the pressures building on the retirement incomes system including modifying the age pension, superannuation and tax systems, according to new research released by the Actuaries Institute.
The research, a white paper titled Australia's Longevity Tsunami – What should we Do?, seeks to provide an actuarial analysis of the problems confronting the Government and possibly some answers, including substantial retirement policy reform.
Commenting on the white paper, Actuaries Institute chief executive Melinda Howes said that by 2050 almost a quarter of the population would be aged over 65 compared to just 14 per cent now.
"Underestimating life expectancy will have major implications for retirement incomes policy, which must take into account the individual financial security as well as the economy-wide costs of providing for an ageing population," she said.
The Actuaries Institute white paper outlines a number of policy changes for the Government to consider including:
- Providing greater incentives to individuals to take the majority of their retirement benefits as an income stream;
- Increasing the preservation age to three- to -five years less than the age pension age;
- Extending the MySuper regime to include post-retirement solutions with 'intelligent defaults' that provide retirees with secure income streams;
- Removing the impediments that discourage older people from working, including age limits on superannuation contributions, and the means test; and introducing an increased age pension or payment for people who continue to work past the age pension age;
- Removing legislative barriers preventing innovation in developing post-retirement income-stream products such as annuities; and
- Linking changes in the age pension eligibility age to improvements in life expectancy.
- Howes said the white paper had served to highlight the situation Australia was facing and the fact that, as a nation, it did not have years to reform the system.
"The current system does not take into account how old we may live to in the foreseeable future," she said.
"In fact, rules around the age pension and superannuation contributions encourage Australians to retire earlier than they otherwise might. This simply isn't sustainable."
