Incentives needed to boost use of retirement income products
Government incentives need to be given to encourage retirees to invest in income generating products instead of purchasing assets that do not provide a regular return, the Institute of Public Accountants (IPA) believe.
IPA chief executive, Andrew Conway, called for legislative reform to encourage retirees not to use partial or whole lump sum payments from their superannuation fund, to purchase non-income generating assets.
"Many retirees take either a partial or total lump sum, with a high percentage of these using a lump sum to pay off a mortgage or purchasing other non-income supporting assets," he said.
"A smaller percentage of retirees are investing in a pension product such as an annuity or life pension, or an income earning product such as a bank account.
"While the IPA supports choice in superannuation, the current use of retirement funds is not always appropriate and does little to diminish the future pension burden faced by a shrinking workforce and aging population.
"The IPA therefore believes there should be suitable incentives which encourage retirees to invest in income streams such as pension and annuity products.
"Annuities may be the missing link in people's thinking between drawing down from their existing superannuation and finding sustainable income streams that support their retirement.
"Annuities support the policy intentions of the superannuation system and will generally better provide for the longer term needs of retirees and protect against cost of living risks."
AUTHOR
Nicholas O'Donoghue
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