How Australians spend their super in the decumulation phase is set to change in the next few years, a new set of research briefs from the ARC Centre of Excellence in Population Ageing Research (CEPAR) has shown.
The set of three research briefs presents the latest data on retirement income in Australia and features findings from over 40 of CEPAR’s leading researchers.
The briefs focus on the public and private elements of retirement incomes provision, with research insights providing the evidence base for the design of superannuation decumulation products and models for policy reform, CEPAR said.
“Much thought has gone into accumulating superannuation, less into its decumulation. Australia is the only OECD country that has a mandated pre-funded accumulation structure without a mandated decumulation structure,” said lead author, CEPAR senior research fellow Rafal Chomik.
“Yet how Australians spend their super is set to change in the next few years. A policy framework is under development to require fund trustees to offer risk-pooling products to members.
“For the superannuation sector, this could be a new opportunity. For government, it comes with concerns that the inefficiencies that have plagued the accumulation phase could also translate to inefficiencies in the retirement product market.”
CEPAR chief investigator Michael Sherris, a professor of actuarial studies at the University of NSW, said individuals don’t generally turn superannuation assets into retirement income products, leaving retirement risks with consumers, who by holding on to super assets self-insure many retirement risks or rely on the government safety net.
Those receiving private income streams tend to rely on phased withdrawals, with no cover against longevity, investment and inflation risk, he said.
Chomik said trustees would need to determine which retirement income products they offer their members. He said new retirement income products, such as pooled, deferred, long-term care, or variable annuities, aim to provide the combination of security and flexibility that individuals seek in retirement.
Professor Sherris also noted that the subject of super decumulation is a “live debate”.
“Policies decided in the next few years will determine the future of superannuation decumulation in Australia, which is leading the world in policy that attempts to combine flexibility and government safety-net provision,” he said.