He explained that current legislation restrains the development of products, such as deferred lifetime annuities, that would enable retirees to ensure their longevity risk.
“For this innovation to happen, legislative barriers need to be removed,” Mr Benari said.
“There are policy reasons for the barriers that result from the fact that the superannuation arrangements were drawn up with specific products in mind, and longevity just wasn’t one of them,” he said.
Industry bodies such as the Actuaries Institute, Financial Services Council (FSC) and Association of Superannuation Funds of Australia (ASFA) also support the removal of legislative barriers.
“As the impact of longevity risk emerges over time, if it is left unchecked it will introduce vulnerabilities in the public and private balance sheets, effecting financial stability and the quality of our lives in retirement,” Mr Benari said.
Currently, Australians are fourth behind Japan, Switzerland and China in terms of lifespan.
Mr Benari assures that without policy change, Australia’s credit rating will go down one grade every 10 years by 2040.
“Australia has done an admiral job on the accumulation side over the last 20 years. The benefits of this are starting to be seen with large retirement balances which are capable of providing substantial improvements in living standards above aged pension entitlements,” Mr Benari said.
But with baby boomers starting to retire, an ever increasing flow of money is moving from accumulation to retirement. In 2012, flows were $53 billion and Rice Warner Actuaries said these are expected to increase to $135 billion by 2020.
“The timing is therefore very right to ensure the framework for retirement phase is at the correct settings, that retirees have access to the right products and the government encourages the right behaviour,” Mr Benari said.
