A Framework to 'Maximise' Retirement Income

This Dialogue Paper explores how superannuation trustees may need to approach any quantitative requirements and analysis to satisfy Australia’s new Retirement Income Covenant legislation from 1 July 2022.

It focuses on a cohort that represents ‘middle Australia’ when entering retirement.

For this cohort, setting a fixed end date for their ‘period of retirement’ is unlikely to deliver the confidence they need to maximise their sustainable spending.

To increase the efficiency of their spending in retirement, their ‘period of retirement’ needs to be set to end on the death of each individual.

When thinking about retirement income, an important reference point for trustees to consider is a risk-free retirement income stream. An inflation-linked annuity addresses the three main retirement risks (longevity, investment and inflation) and can align with the retiree’s ongoing living costs.

From this, retirees can use different combinations of products to suit their own risk-reward trade-off.