Governments should think about increasing the uptake of income stream products including bringing in sensible default options for retirees moving into or in the superannuation drawdown phase.
That was the recommendation from the Actuaries Institute in its response to the Financial System Inquiry interim report, which said the superannuation retirement phase is underdeveloped and is ill-equipped to meet the longevity risk management requirements of many retirees.
The Institute said Australia does not have a "coherent approach" in its retirement income system and it needs a solid policy framework and an appointed policymaker.
It asked for a retirement income blueprint to boost consumer confidence in the system.
"The interaction between retirement incomes, age pension, aged care, health care and home wealth is complex and critical to the overall sustainable functioning of the economy," the response said.
There are many shackles preventing the development of retirement income products with risk management features such as annuities, which is limiting retirees to choosing between lump sums, account-based pensions and guaranteed immediate annuities.
These include the Superannuation Industry (supervision) regulations, age pension asset test and income test, and the requirement for several approvals by different organisations with varying interests.
The response suggests the Government should formulate a policy that removes or decreases the regulatory, economic and consumer barriers to foster innovation in the retirement income segment.
The Institute also acknowledged that operating costs and fees seem high compared to international counterparts but said many factors need to be taken into account before aiming to lower fund fees.
Many domestic funds are "choice" funds rather than default plans, and things like financial advice, insurance, distribution and legacy system maintenance also need to be taken into account.
Moreover, the industry needs to monitor how the SuperStream and MySuper reforms will change operating costs before taking action on fee levels.
