Most Australians find retirement planning stressful, despite typically having saved enough for a comfortable retirement. Few retirees draw down on their retirement savings as intended, and many are net savers. This is turning Australia’s multi-trillion-dollar compulsory superannuation system into a massive, taxpayer-subsidised inheritance scheme.
Many countries automatically offer retirees an income that lasts the rest of their lives. But Australian retirees get little guidance about how to use their super. While we’re working, key decisions about our super are typically made for us, such as how much to contribute and how those savings are invested. But once we retire, the super system casts us adrift.
Federal Treasury’s proposed best-practice principles for retirement income solutions are, in many ways, a step in the right direction. But this approach – trying to steer funds towards producing better outcomes with high-level, non-binding guidance – will ultimately fall short. More structural change is needed to ensure the system fully delivers on its promise of more comfortable retirements.