More than half of all assets held within self-managed super funds (SMSFs) are in retirement phase, according to Dexx&r Market Projections Report.
The report showed $296 billion of Australia's total $506 billion in SMSF assets are in retirement phase, with the figure forecast to burgeon in the future.
Dexx&r expects SMSF retirement phase assets in Australia will reach $562 billion by 2023, accounting for 61.5 per cent of a total $914 billion in retirement income assets.
The report says there will be a growing appetite for fixed income investments among retirees as they look for less risk as they age.
"The issuance of medium- and long-term inflation linked bonds by Commonwealth and State Governments in Australia would meet self-funded retiree demand for a low risk and stable income stream and provide a pool of medium- to long-term capital that could be used to fund infrastructure development," the research said.
It said there are many benefits in fixed interest inflation-indexed investment that is backed by the highest credit rating available in the Australian market.
It offers liquidity, which would be provided through a secondary market for these bonds. This is relevant if a retiree's capital needs change — for example, when they move into a nursing home.
The report said fixed income investment also reduces the risk of a retiree's income running out before they die. It provides a low risk investment option for the surviving partner.
Fixed income investments are protected against inflation. Coupled with the projected growth in SMSF assets, it suits retirees' need for certainty of income.
"For life companies, the availability of inflation-indexed bonds would enable them to more closely match assets and liabilities held to support longer-term annuities," the report said.
