The Australian government is considering making all investors purchase some form of guaranteed income, just four months after the UK government removed the requirement for UK pensioners to purchase an annuity from 2015.
Australian pension investors had similar restrictions lifted 22 years ago, but there have been growing concerns that many investors have seriously depleted pension funds as a result of the freedom to invest given.
The consultation on pensions is part of the Murray Review and part of a wider look at Australia’s Financial System.
A460-page interim report on the Murray Review, which was published at the beginning of July, stated that half of superannuation benefits (pension funds withdrawn) in retirement were paid as lump sums.
It also said that approximately 44 per cent of pensioners who take a lump sum use it to pay off housing and other debts, to purchase a home, or make home improvements.
A further 28 per cent use their lump sum to repay a vehicle or holiday loan or to purchase a holiday or new vehicle.
The interim report also noted the number of households entering retirement with debt, particularly a mortgage, was increasing.
As a result the Australian government was consulting on ways of “providing incentives to encourage retirees to purchase retirement income products that help manage longevity and other risks, or forcing people to convert all or part of their superannuation benefits into an income stream that provides protection against inflation and longevity risk.”