For over a decade, successive governments have grappled with the challenge of creating a retirement income system that serves most retirees well. Currently, retirees face two main choices: drawing a pension from their superannuation fund or opting for a lifetime pension such as an annuity. Both have drawbacks. Relying solely on superannuation exposes you to market volatility while converting part of your super into a life pension sacrifices flexibility and a significant portion of capital.





The government also believes many retirees live too frugally, largely due to ingrained habits and a fear of outliving their savings. A step in the right direction to encourage retiree spending is the relatively new lifetime income stream product. Its key incentive is the 40% exemption of the purchase price from the pension assets test, offering asset-tested pensioners a 3.1% annual boost to their pension. However, this provides no benefit to self-funded retirees.

The left-leaning Grattan Institute has joined the debate with a proposal for the government to offer all Australians a government annuity that guarantees a lifetime income. Their recommendation goes further, suggesting retirees be encouraged to allocate 80% of their super balance above $250,000 into this government-backed annuity. According to their analysis, such a reform could boost most retirees’ incomes by up to 25%.

Consider a couple with $750,000 in super. Under the Grattan proposal, they would be encouraged to invest $400,000—nearly 54% of their liquid capital—into a lifetime income stream. This would leave them with a lump sum of just $350,000.


Lorem ipsum dolor sit amet, consectetur adipiscing elit. Quisque in diam id erat facilisis consectetur vitae vel urna.

Ut lacus libero, suscipit auctor ipsum sit amet, viverra pretium nisl. Nullam facilisis nec odio nec dapibus. Integer maximus risus et velit porttitor ullamcorper