Challenger calls for deferred annuity review

09-Mar-2015

By Elizabeth Somerville

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Policy changes that allowed for and encouraged the development of retirement income products should be a top priority following the release of the "2015 Intergenerational Report" (IGR), Challenger said on Friday.

“The first set of policy changes that are urgently needed are around the removal of legislative impediments to the issuance of deferred lifetime annuities (DLA),” Challenger chief executive Brian Benari told financialobserver.

Although readily available overseas, DLAs could not be purchased by Australian retirees as they were not recognised under Australia’s taxation and superannuation systems, Benari said.

“This was unintended, not deliberate, and would result in them being unfairly taxed if they were launched here,” he said.

“We need to urgently level the taxation playing field to allow the introduction of DLAs, which will come at no cost to revenue, and have bipartisan political and wide industry support.

“With the latest IGR stressing the looming fiscal cost of our ageing population, the time to act on DLAs is now.”

The group also called for innovation in the retirement income product space to meet the needs of the baby boomer generation entering that phase.

“Over the next 40 years, the proportion of the population over the age of 65 will more than double to 22.6 per cent,” Benari said.

“By putting a spotlight on the macro trends of our ageing population, the IGR’s findings should encourage development of the type of retirement income products that enable people to plan with confidence for a longer retirement.”

The Association of Superannuation Funds of Australia (ASFA) also called for innovation and encouragement to develop retirement products in the wake of the IGR.

“The starting point is to get the regulatory and legislative settings right, to foster innovation and broaden the range of products available to the community,” ASFA chief executive Pauline Vamos said.

“It is therefore encouraging that the government is reviewing the regulatory obstacles that hinder the development of new products as part of the Financial System Inquiry process."

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