Trustees should be able to default members into MyPension type income streams and it should be compulsory for superannuation fund statements to disclose income stream projections, according to a new policy framework released by the Association of Superannuation Funds of Australia (ASFA) today.
In a comprehensive paper, entitled A New Framework for a Better System, ASFA outlines the principles on which it believes Australia's retirement income system should continue to be built, as well as the goals and objectives for the system. Importantly, it provides concrete recommendations on the policies and design elements required to achieve these objectives.
"We know that the ageing population is going to be a game changer when it comes to retirement incomes policy. It's time we stop pointing at the problem, and start developing the solutions required to deliver a better system for Australia's retirees. This will require innovation and bold policy decisions, which is why we have released a framework that will guide policymakers towards creating a system where delivering income streams in retirement are at its core," says ASFA CEO Ms Pauline Vamos.
"The days of thinking about taking superannuation in a lump sum are numbered, and the era of income streams has commenced. Most people are looking for a steady income stream throughout their retirement. We need to ensure that they can make a safe choice, with as much flexibility as possible to cater for a very diverse group of older Australians."
Specific recommendations include allowing trustees to default members into MyPension arrangements on an opt-out basis, providing incentives through the social security system for people to take up income streams and mandating the disclosure of income-stream projections on superannuation account statements.
"It's important to understand that default does not mean that one size fits all. People have very different needs in retirement and we have therefore identified six different types of income streams and designed the framework around them."
Ms Vamos says in addition to addressing the system gaps in the post-retirement area, in the 20 years since the introduction of the Superannuation Guarantee (SG), the system has matured and the environment has changed to the point where other gaps are also being exposed.
"The system is not delivering as well as it could for women, the self-employed, casual workers and Indigenous Australians. We must start making policy changes now, to enhance the superannuation experiences of these groups, and ensure they able to accumulate adequate savings for their retirement."
Specific recommendations include removing the $450 threshold for the SG, allowing employers to contribute more super for their female workers, extending compulsory super to the self-employed and applying SG to all substantive income replacement payments including income replacement insurance, parental leave and workers compensation.
The report also makes a number of recommendations around insurance, recognising that the factors that are contributing to the rapid increase in premiums must be addressed as a matter of urgency.
"In particular, the definition of permanent incapacity must be tightened to ensure members are not assessed at a single point in time, but from time-to-time, taking into account possible rehabilitation, re-training and treatment options that may impact their ability to work.
"ASFA's Super System Design Policy Council, which has broad representation from all sectors, has developed this paper over several years and I would like to acknowledge their contribution to this significant piece of work.
"This paper is about the future, it is not about the past. In order to implement these changes, we need bipartisan support and for policymakers to take a long-term, holistic view. We must rebuild community confidence so that superannuation can successfully deliver to individuals and to the broader economy," Ms Vamos concluded.
For a copy of the full report, click here.
To access the speech in which the paper was launched, click here.
For further information, please contact:
Lisa Chikarovski: Manager – Consumer Strategy, Media and Public Affairs, 0451 949 300.
ASFA is the peak policy, research and advocacy body for Australia's superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.