The pension systems in these counties all face a common problem arising from increases in life expectancy—retirees in these economies can expect to outlive their savings by many years.
The report generated headlines around the world, including in the Australian Financial Review, which reported that, in Australian, men are expected to outlive their savings by 9.9 years and women face an even larger gap, outliving their savings by 12.6 years.
Our compulsory retirement savings system is the envy of many other countries and has led to Australia having the fourth largest pool of retirement savings in the world. However nearly all the retirement savings are in defined contribution (DC) plans where the retirement risks fall on the individual.
We are pleased that the report looks at both the accumulation and the decumulation phases of the retirement income systems of these six countries. There is much work needed in the accumulation phases in all countries to help individuals improve the amount they have when they retire. The retirment phase, when the retiree utilises their savings, has far less research dedicated to it and is where more work is required. This is the equivalent to helping people up to the top of the mountain before giving them a push and wishing them all the best on the way down!
The primary objective of the superannuation system is not to accumulate retirement savings but to provide retirement income. People need help them combine their retirement savings, age pension eligibility and other assets to create a suitable retirement income stream. The report calls for improved products and improved retiree communication and advice.
The Optimum Pension Real Lifetime Pension is one such product that can effectively fill this gap in the market. It has been developed for the Australian market to address longevity risk and provide greater peace of mind for all Australians to have an enhanced retirement lifestyle.
Saving for retirement is necessary but not sufficient for improving outcomes in retirement. It is incumbent on the financial services industry to improve its retirement offerings.