With an estimated $330 billion set to flow out of the accumulation phase over the next decade, super funds will have to offer annuity products if they want to retain members, according to Actuaries Institute chief executive Melinda Howes.
"Given that Australians are the second longest-lived population on the planet, we need to allow retirees to insure themselves against longevity using products like deferred lifetime annuities," Howes said.
Countries such as Chile and Switzerland have similar retirement savings systems as Australia in the accumulation phase, but "that is where the similarities stop", she said.
"Chile and Switzerland both favour annuitisation in retirement and have some compulsion," Howes said.
Whether Australia should implement "hard" or "soft" compulsion - or a range of incentives instead - was a matter for debate, Howes said.
But there are also significant behavioural, legislative and political barriers to a "vibrant and competitive" annuities market in Australia, she said.
Consumers tend to "overweight" the importance of unlikely events such as longevity; annuities appear very expensive to consumers; and the availability of the age pension is "the final nail in the coffin", Howes said.
The Actuaries Institute of Australia has recommended that the SIS Act Regulation 106 be amended to "modernise" the definition of an annuity to allow product innovation, she said.
Lifetime non-commutable annuities should also be made exempt from the Assets Test; annuities and deferred annuities should be allowed to be issued as a component of an account-based pension; and deferred annuities should be treated as a pension in the drawdown phase for tax purposes, Howes said.
Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Coalition, which has pledged to reverse any changes if it wins next year’s election.
In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges.
Chant West analysis suggests super could be well placed to deliver a double-digit result by the end of the calendar year.
Specific valuation decisions made by the $88 billion fund at the beginning of the pandemic were “not adequate for the deteriorating market conditions”, according to the prudential regulator.