Industry push on growth pension
The Investment and Financial Services Association (IFSA) has stepped up its support for the introduction of the proposed growth pension, to fill the existing gap in the market.
Speaking at yesterday’s industry lunch, IFSA director and Colonial First State chief executive officer Chris Cuffe said the Government needs to seriously consider introducing growth pensions.
“Unless the concept of the growth pension is taken up soon, the Government will fail in its task for the baby boomers and will feel it when they have to pay out to the large numbers of retirees,” he said.
The growth pension, or complying account-based income stream, is based on a portfolio that investors choose and can include the growth asset classes of shares and property. Government regulation restricts complying annuities to invest in fixed interest and cash only.
The growth pension would also have a fixed term based on the life expectancy of the investor.
Cuffe said with statistical research showing people are now living longer, there is a gap in the market for such a product.
"There is an obvious gap in retirement income streams at the moment. Although there are no underlying problems with allocated pensions," he said.
With the ability to invest a proportion of funds in shares, the growth pension provides greater freedom and an element of control to the investor. The transparency of fees and charges, and payment of balance on death are other advantages of the growth pension.
"We could now be living longer than the time spent in the workforce. If time is on your side, growth investments are better," Cuffe said.
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