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Calls for Retirement Overhaul

The Age

29 July 2003

Australians would be encouraged to change to part-time work before retiring and opt for pension-like superannuation payments under an overhaul recommended by a Senate committee.

The committee has recommended a move away from superannuation being paid in lump sums, and suggested programs to help older Australians plan for retirement.

A new system could promote growth pensions - retirement income based on investment portfolios, including shares.

Growth pensions have fixed terms based on the recipients' life expectancies, with a set amount of income paid every year.

In a report, the committee said the government should urge people to move away from lump sum superannuation payments, which offered restricted access. This would ease restrictions on interest-based investments with lower returns.

"By mandating the use of a proportion of superannuation savings for the purchase of a genuine complying annuity on retirement in Australia, the committee majority believe that life insurance offices and other providers will re-enter the annuity market, and offer a range of new and different products to retirees," the committee report said.

As well, the federal government could expand retraining assistance programs to older workers, and reform benefit schemes to help people plan for retirement, the report said.

The proportion of Australia's population aged 65 and above is forecast to more than double to 26 per cent in 2051, from the current 12 per cent.

Committee chairman John Watson said there was a need for reform.

"Socially and economically, Australia would gain enormously from promoting a more progressive transition from work to retirement," he said.

Committee member and Australian Democrats superannuation spokesman John Cherry said people should be encouraged to take more of their retirement savings as annuities rather than lump sums.

Investment and Financial Services Association chief executive Richard Gilbert said he wholeheartedly supported the findings.