The Association of Independent Retirees (AIR) has endorsed the federal government’s announcement to extend the reduced minimum pension drawdown rate, saying the move was popular among its members and will assist them in managing longevity risk.
”The 50 per cent reduction in the minimum age-based drawdown percentages for superannuation income streams for the past two years was welcomed by retirees, as is the extension of the temporary reduction for a third year 2021-22,” AIR president Wayne Strandquist said.
Strandquist acknowledged the decision as being a sound one as it allows retirees greater flexibility in managing their income streams during times of increased market volatility and uncertainty, which have occurred as a result of the COVID-19 pandemic.
“If retirees are forced to withdraw money from superannuation when the capital value of superannuation accounts are depressed or when the returns being generated are low, it will have long-term impacts on how long their superannuation will last,” he noted.
To this end, he reiterated the consumer body’s preference for a permanent reduction in the minimum pension for some retirees.
“The Association of Independent Retirees has advocated for some years to government that the minimum withdrawal percentages from superannuation in retirement should be permanently lowered for retirees who are 75 years and older,” he said.
“The time spent in retirement is now considerably longer than when the compulsory superannuation system was established. In addition to this longevity risk, investment risk also increases over time with more periods of volatility in the value of retirement savings and retirement income.”
Again, he argued a permanent reduction in the minimum pension would provide older Australians greater flexibility to manage their financial affairs and deal with other types of expenses they will experience in their latter years.
“Retirees need a permanent reduction to minimum super drawdowns so they have the flexibility to deal with whatever comes along, as well as preserving funds for out-of-pocket health and age-care expenses in later life,” he said.