Challenger has pushed the case for deferred lifetime annuities (DLAs) stating their introduction in the near future would alleviate future pressure on the pension system and would cost the Federal Government nothing to introduce.
Speaking at the group’s annual general meeting yesterday, Challenger chief executive officer Brian Benari stated that modelling conducted in 2011 showed that with only a $10,000 average premium paid by retirees aged 65 the Federal Government would face no costs associated with DLAs.
Benari also stated that if DLAs were introduced immediately the Federal Government would save three per cent on aged pension and aged care costs by 2050.
“The time to act is now. In around 30 years, the fiscal pressure from our ageing population is expected to peak, in terms of age pension, aged care and health care costs. If we have deferred annuities commencing payments at this time, they will take the pressure off,” he said.
Benari said DLAs needed to be placed on an equal footing with other retirement income stream products as they worked alongside the compulsory superannuation system in moving longevity risk from the public to the private sector.
“We’re now three years into the 20 year Boomer retirement phase. Three years of retiring Boomers have missed an opportunity to purchase pure longevity insurance in the form of a deferred annuity – a product which is readily available in many other retirement savings systems,” he said.
Benari said there had been seven different industry forums and reviews over the past five years which had argued for the introduction of DLAs, including the Henry Review, and while there was broad industry consensus on their use the remaining barrier to entry rested with the Federal Government.
“If we make some small and painless legislative changes today, we will reap an enormous payback in welfare and fiscal benefits in decades to come. With the Government’s review of Retirement Income Stream Regulation almost complete it’s time to finish what was started five years ago,” he said.
“The government has a great opportunity to get done what the previous government could not.”