The superannuation industry needs to develop more options for funding the post-retirement period, a Mercer report has said.
Mercer Australia/New Zealand managing director David Anderson said Mercer expected the pressure on Australia's retirement savings and income system to become far greater than expected in the coming decades despite Australia's retirement system comparing favourably to its international peers.
"Putting the potential superannuation guarantee increase from 9 per cent to 12 per cent to one side, the gap between contributions made to the superannuation system and benefits taken by retirees is expected to narrow in the years ahead," Anderson said.
"Against this background, governments, individuals and the superannuation industry need to focus on maximising superannuation savings, delaying retirement through extended workforce participation and improving retirement funding options."
Anderson said it wasn't just about boosting super contributions but having a whole of life investment strategy, which should sit within the default option of super funds.
This approach uses young members' long-term investment horizon and provides young people with a high exposure to growth assets for a considerable period, but recognises the lower risk tolerance for individuals approaching the retirement phase, he said.
Mercer's actuarial modelling also showed that deferring retirement and working an extra two years was likely to increase the age at which a member's super savings runs out by around five years.
"Delaying retirement doesn't just help individuals build an extra retirement income buffer, it has a positive effect on the national economy too by boosting workforce participation and the ratio of workers to retirees," Anderson said.
"While we need people to think beyond simply spending or hoarding their lump sum superannuation, the industry must also develop products and solutions that effectively manage mortality risk and maximise income in retirement.
"Superannuation funds and their investment consultants, fund managers and investment product designers all have a role to play in developing innovative products that share risk equitably, cost-effectively and sustainably."
