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Urgent reform needed in retirement system, says Actuaries Institute

Three superannuation and retirement experts have petitioned the Government to review Australia’s retirement system and integrate the Age Pension, superannuation and aged care.

A green paper released by Actuaries Institute says a retirement reform would provide greater diversity in wealth, health and longevity outcomes for Australian retirees. [Source: Shutterstock]

A green paper released by superannuation company, the Actuaries Institute, says a retirement reform would provide greater diversity in wealth, health and longevity outcomes for Australian retirees.

The Actuaries Institute believes if reform doesn’t happen, more retirees will enter retirement as renters or not having paid off their family home.

The green paper, Options for an Improved and Integrated System of Retirement, authors, Dr David Knox, Dr Anthony Asher and Michael Rice, stated that the Australian system has obvious shortcomings, due to its complex, intrusive system, which has anomalies, produce perverse incentives and is sometimes unfair.

The paper states, “And, as an increasing proportion of the population move from the accumulation to the pension phase, problems that beset the system will become more apparent.”

Any structural reform will provide overall fairer retirement for all retirees, says the green paper.

The superannuation organisations believe some of the options for review should be around universal benefits, means tests, treatment of the family home, and an end to tax concessions for large super fund balances.

Elayne Grace, Chief Executive at the Actuaries Institute, says, “The best system would take an integrated view across all sources of income and expenses for retirees. This includes the Age Pension, superannuation, the family home, aged care and health costs. The current system, though world-leading in some respects, falls well short of that.”

The Actuaries Institute believes that the retirement system should make Australians feel assured that they can confidently live their retirement years with dignity.

The report found that retirees need access to a regular income stream, savings to cover unexpected expenses, and protection against longevity, inflation and market risks, known as the ‘retirement income trilemma’.

Additionally, the system needs to be easy to understand so retirees who decide not to go to a financial advisor, can make the right choice themselves.

Australian retirees should be encouraged to spend their savings to continue a dignified standard of living, rather than being careful with what they spend their money on or transferring all of their wealth to the next generation through their estate.

The paper says, “The Actuaries Institute encourages that debate to start now. 

“If it does not, Australians may lose the opportunity presented by the fiscal headroom of the declining Age Pension costs, and the lead time we have to prepare for known longer-term changes, such as those to patterns of home ownership and work, longevity and growing health and aged care costs.”

The paper suggests a few possible ideas, like a universal Age Pension or concession care that sets an age to access cheaper medical care and Pharmaceuticals Benefits Scheme (PBS) drugs.

President of Actuaries Institute, Nicolette Rubinsztei, says, “There are a number of known longer-term trends: an ageing population, a maturing superannuation system, changing patterns of home ownership and work, a growing dispersion of wealth and health, and growing private costs for health and aged care.

“All of these will aggravate the inconsistencies that stem from a lack of appropriate integration between the various components and undermine the potential for a dignified life for all retirees.”


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