Are we spending our super all wrong?
After some controversial debate in the newspapers, Joey Maloney, Deputy Programme Director at the Grattan Institute, joins me to talk about the retirement phase of super.
This conversation began as a back-and-forth debate between the Grattan team and myself in the papers after Grattan’s latest report “Annuities would take the stress out of retirement”. It pointed out something we all agree on—Australia’s retirement system is too complex. Retirees are left stressed, uncertain, and lacking the confidence to actually spend their super. But the recommendations Grattan made were controversial indeed. (Have a read of my article here).
In this episode, I chat with Joey Maloney, Deputy Programme Director at the Grattan Institute’s Housing and Economic Security Programme, about the retirement system, how annuities work, and their bold suggestions that the government should encourage people to invest up to 80% of their super balances over $250,000 in lifetime annuities and that the government should provide them.
We also take an interesting look into lifetime annuities—how they work, how they’ve changed and why Grattan is calling for stronger guidance toward annuitisation to help retirees spend with confidence while securing their future.
This one gets a bit technical, but if you’re in your 50s or beyond, it’s essential listening. We break down the jargon, explain your options, and explore what needs to change to make retirement spending simpler, smarter, and less stressful.
LISTEN TO THIS EPISODE OF THE PODCAST HERE:
Highlights of this episode
Super’s big contradiction – The system gives strong guidance while you’re working but leaves you adrift at retirement.
The problem with minimum drawdowns – Many retirees anchor to the minimum withdrawal rates, preserving wealth instead of spending for a better retirement.
Why retirees lack spending confidence – Uncertainty around lifespan, investment returns, and fear of running out keeps people cautious.
Introducing annuities – How they work, why they’ve had a bad rap, and the role they could play in a smarter retirement income strategy.
The Grattan Institute’s big proposal – A preset guidance system encouraging retirees to annuitise part of their super for secure lifetime income.
Age Pension advantages – How annuities can improve access to the Age Pension through assets test discounts.
Questions from our Primetimers — Plenty of questions popped out of our recent debate in the media. Bec asks a few.
Why the private market isn’t enough – Despite more annuity options today, uptake is low, and Joey argues a government-backed solution may be needed.
What needs to change? – Raising awareness, better financial education, and system tweaks to help retirees confidently spend their super.
Have a great week everyone! And make your Prime Time count.
Annuities are a good idea for those not wanting to work out the best investment options or how much to take out (or not take out) as a pension.
But some of us see Super, as funds that need to keep earning good money for the next few decades as they need to last that long. Looking at them as long term well after retirement, means that a higher risk portfolio can actually be medium risk.
An annuity will work out regular funds payments based on average returns with some allowance for risk, I would think. Something like 6-8% return on average.
If the portfolio is instead invested in a large portion of Australian and International shares it is more likely that returns will be 9-13% (certainly the case for last 4-5 yrs for me). Having 80% of investments moved to annuity would remove the capacity to follow this approach.
Not for everyone but great to have the option.
There’s no way I’d trust the government with my retirement savings even if they guaranteed an annuity. They can’t manage the taxes they collect now.