Australians will have better quality of life, greater flexibility and choice in retirement, following changes to the means test for longevity products introduced into Parliament on Thursday 29th November.
The legislation changes how the value of longevity products is calculated for the assets and income tests relating to the age pension. It provides fair and appropriate means test outcomes for all pooled lifetime income stream products.
The Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 is fully supported by Mercer.
Senior Partner David Knox said the changes would help mitigate the risks faced by retirees.
“Many retirees are withdrawing close to the legislated minimum from account-based pensions to avoid the risk of outliving their retirement savings. This can impact their health, wellbeing and overall quality of life,” Dr Knox said.
“The legislation paves the way forward to secure long-term retirement income. Superannuation funds and financial services providers now have an incentive to develop products that provide certainty in retirement income.
“It also provides a behavioural incentive for Australians and financial planners to make decisions that benefit their long-term financial wellbeing. It gives them a nudge to think about longevity products as part of the retirement income mix.”
Dr Knox said the new legislation would kick-start the development of Comprehensive Income Products for Retirement (CIPRs). It responds to a key recommendation of the 2014 Financial System Inquiry.
“Now, we can really begin to pool longevity risk and have confidence in being able to provide long-term income for retirees,” Dr Knox said.
Mercer also supports the upcoming introduction of a Retirement Income Covenant, requiring Superannuation Trustees to have a retirement income strategy in place.
Mercer delivers advice and technology-driven solutions that help organisations meet the health, wealth and career needs of a changing workforce. Across the Pacific, organisations look to Mercer for global insights, thought leadership and product innovation to help transform and grow their businesses.
Mercer’s more than 23,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With more than 65,000 colleagues and annual revenue over $14 billion, through its market-leading companies including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com.au.