Expand retirement funding model

three-pillar retirement funding Actuaries Institute

The three-pillar retirement funding model should be expanded to factor in the increased longevity of retirees and their access to income sources after finishing full-time work.

The three-pillar retirement funding model should be expanded to include other income sources available to retirees, who are living longer and need help and assistance for the decades following the end of full-time work, the Actuaries Institute has said.

In a paper released this week, titled “Retirement Matters”, the institute stated retirement funding models based on the age pension, compulsory superannuation and voluntary savings did not factor in other sources of income and the shift in the nature of retirement.

According to the paper’s authors – former SMSF Association chair Andrew Gale and superannuation adviser Stephen Huppert – retirement has evolved from being a period of a few years before death to a new life stage that can last up to three decades, meaning more work was needed to prepare people for this period of their lives.

“Retirement has evolved significantly and many people will choose not to follow conventional retirement patterns. The needs of people who have 20 to 30 years of retirement ahead of them are going to be very different to those who in the past had only a decade or so,” Huppert said.

The pair said the three-pillar model should be expanded to include income from part-time work or accessing income from equity in the family home or other property.

Additionally, the paper also called for the government to set up a regulatory framework to enable superannuation trustees to provide people with advice on when to retire, age pension entitlements, retirement income needs and future living expenses.

“People are also often after some general guidance about retirement planning rather than comprehensive financial advice, which can be hard to get and expensive,” Gale said.

“A help guidance and advice framework would make it easier for people to obtain the support they need. This remains a real need even after the QAR (Quality of Advice Review) report and the government’s response to the report.”

At the time of the release of the paper, the government announced it would examine the role of the superannuation sector in providing help in dealing with retirement income and the delivery of better income products and services.

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