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.
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.
Hi Mike, you might wish to check out the new 'investment-linked' annuities that allow you to buy an annuity where you pick the investments. These were designed precisely for the points you raise. The government wanted to encourage innovation so created rules to allow for these.
I have a lifetime Defence Force part pension (CPI indexed) which I am very glad to have as part of my income stream in retirement. While I believe that the proportion of annuity vs direct super drawdown is a personal choice dependant on individual circumstances, I believe that it provides a similar level of security as an insurance policy to make sure that you will always have a little something to supplement the aged pension if everything else goes belly up.
It’s difficult to trust the Gratton Institute, they were the people who recommended abolishing imputed credits which would have devastated many self funded retirees.
The government has made the future more scary by increasing the amount we will have to pay for aged care if we live long enough to need it. That’s why a lot of people save their money.
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.
Hi Mike, you might wish to check out the new 'investment-linked' annuities that allow you to buy an annuity where you pick the investments. These were designed precisely for the points you raise. The government wanted to encourage innovation so created rules to allow for these.
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.
I have a lifetime Defence Force part pension (CPI indexed) which I am very glad to have as part of my income stream in retirement. While I believe that the proportion of annuity vs direct super drawdown is a personal choice dependant on individual circumstances, I believe that it provides a similar level of security as an insurance policy to make sure that you will always have a little something to supplement the aged pension if everything else goes belly up.
It’s difficult to trust the Gratton Institute, they were the people who recommended abolishing imputed credits which would have devastated many self funded retirees.
The government has made the future more scary by increasing the amount we will have to pay for aged care if we live long enough to need it. That’s why a lot of people save their money.
I would only look at an annuity if it was government backed, to ensure my money stayed secure. Otherwise the risk over decades is too high.