New proposed superannuation plan that may offer options for retirees

13 August 2009

Australian superannuation may experience a few changes if a new proposed plan is approved which suggests the commencement of a new top-up options for retirees would are doing so with limited superannuation funds. The plan proposes that some retirees could ''buy'' a lifetime top-up to the age pension from the Federal Government.

This would work by those retiring with a modest retirement lump sums as their superannuation being given an option to exchange this with the Federal Government for guaranteed income payments as indexed to the age pension.

The proposed plan has been pitched as a solution for the aging population in Australia with many superannuation experts fearing the near future and the manner in which many people finances will be surviving. Fears are related to the lack of long-term security attached to many people's superannuation which may lead to a generation of people who will be solely financially dependent on pension payments in their later years.

The Henry review of tax policy is currently examining the plan with the superannuation industry seemingly divided on what the Federal Government should do to prevent this issue. The review is being lead by the Treasury secretary, Ken Henry, and will apparently involve such procedures as an analysis of current government-provided lifetime income stream products.

Sources informed Fairfax Media that this latest proposed plan has some support in the superannuation industry in particular with some industry superannuation funds and the Australian Council of Trade Unions.

A source told Fairfax Media that ''The model of the public sector offering a 'plain vanilla' lifetime income product is attractive as a way of providing a prudent use of relatively small superannuation lump sums,'

''If it was priced correctly there would be no downside financially for the government. It would be an actuarially fair transaction - and low-income earners would have better incomes during their retirement.''

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