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More longevity risk work needed

The SMSF sector needs to address the issue of longevity risk in a more meaningful manner as the projected age of Australians continues to increase, a senior executive with an industry body has said.

“[Life expectancy] is an extremely important point and one I think it would be fair to say that the self-managed super fund sector probably has not looked at enough,” Chartered Accountants Australia & New Zealand head of superannuation Tony Negline told delegates at the accounting body’s National SMSF Conference in Sydney yesterday.

Negline pointed out one of the problems facing trustees in this area was the fact that strategies such as employing defined benefit pensions or life expectancy pensions were not a solution to the problem nor were any of the other initiatives currently being considered.

“I remain unconvinced that the government’s proposed policy or new products will solve this problem [either] primarily because they generally require pooling of risk,” he explained.

“[It means] if you don’t survive then that money goes off to other people in the pool and I can’t see a lot of investors wanting to hand over their money to people who they actually don’t know in the event that they die early.

“There is a cohort of people who want to do that but in my view there are not that many.”

As a result of the lack of solutions from a product perspective Negline concluded longevity risk is still a very important issue for SMSFs that requires further examination and attention.

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