How Lifetime Income Products Can Help Reduce the ‘Taper Trap’ for Retirees

How lifetime income products can help reduce the ‘taper trap’ for retirees

The taper rate is part of the assets test used to determine eligibility for the age pension. For every $1000 of assets above the relevant threshold, the age pension payment tapers off (or is reduced) by $78 a year.

If those additional assets earn less than 7.8% per annum, the retiree is effectively worse off for having saved more—this is known as the taper trap. Many industry bodies are calling for a reduction in this rate as it penalises older Australians who save more for their retirement.

Most superannuation funds only offer one retirement product to their members in retirement—an account-based pension. The full balance of an account-based pension is counted towards the assets test.
The good news is that some superannuation funds and life insurance companies are now offering lifetime income products to their members when they retire. These products provide retirement income streams for life, even if you live past 100!In addition to guaranteeing an income for life, these products also help reduce the taper trap, as only 60% of their value counts toward the assets tests.
The confidence to spend in retirement with a guaranteed income stream plus boosting retirement income with the Age Pension!
Our paper How lifetime income products can help reduce the ‘taper trap’ for retirees includes several case studies that show the value of superannuation fund trustees offering their members lifetime income products.

Authors: Jim Hennington & David Orford

How lifetime income products can help reduce the ‘taper trap’ for retireesRead our research: How lifetime income products can help reduce the ‘taper trap’ for retirees


Optimum Pensions was launched in 2017 with a single mission – to help Australians lead a comfortable retirement. The Optimum Pensions innovative retirement income solutions are specifically developed to address longevity risk and provide greater peace of mind for all retirees; no matter how long they live.

The Optimum Pensions, award-winning LifeSpan Calculator builds confidence around personal life expectancy and retirees’ possible retirement planning horizon.

Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.
You need to agree with the terms to proceed