Australian moves to limit retirees’ ability to withdraw their superannuation savings as a lump sum have prompted mixed reactions from New Zealand KiwiSaver providers.
Australian Treasury executive director and chief operating officer John Lonsdale said recommendations from the financial system inquiry to overhaul the country’s superannuation scheme were likely to be adopted.
A key finding was that people should no longer be given access to their superannuation savings as a lump sum when they retired. Instead they should be transferred automatically to a default fund designed to provide a stream of income.
Ana-Marie Lockyer, general manager, wealth products and marketing at ANZ, said she would support mechanisms such as limits to lump sum withdrawals being considered alongside the development of retirement product solutions.
She said it would not be a pressing concern until balances were bigger but providers had a responsibility to ensure that KiwiSaver members used their savings to enjoy a more comfortable retirement.
“There is no silver bullet for a post retirement product to ensure the savings will last during retirement and this is a challenge the world over. Knowing this and looking forward a few years it is important that the industry takes adequate time now to consider a number of solutions to ensure the security of members’ KiwiSaver savings for the long term. There will be no right solution for all members but success will be a combination of solutions and mechanisms in place,” she said.
But Jonathan Beale, general manager of wealth at ASB, said restricting lump sum access was the wrong attitude to take. “It seems to imply we don’t trust people to make the right decisions.”
He said a better solution was to improve pre-retirement education so people understood what they needed to save and that it would have to last. “If you focus on the education you hope they wouldn’t spend it all on a boat and a bach.”
Sean Donovan, of Milford, said the scheme had been sold to the public on the basis that they would have full access to the funds at 65. To change that would undermine the scheme, he said.
“The bulk of contributions are done by the individual and their employer. It seems unfair for the government to have the ability to limit how much of your money you can access in retirement.”
He said the financial services industry was capable of developing products to help clients decumulate sensibly.
In Britain, the rules have changed this month so retirees are no longer obliged to purchase an annuity when they retire.