By Patrick Clarke, General Manager of Retirement Solutions at Generation Life

In recent years, the landscape of retirement planning in Australia has evolved dramatically, driven by demographic shifts of an ageing population with higher life expectancies. In fact, according to the Australian Bureau of Statistics, the number of people aged 65 and over is projected to almost double by 2042¹. As more Australians approach retirement, there is a growing need to rethink how we structure and deliver retirement income solutions.

In response, Treasury released a proposal that would see a change to modernise the standards of superannuation funds and encourage longevity protection. These proposals are to introduce voluntary best practice principles aimed at enhancing the design and delivery of superannuation retirement income solutions. It would set a drawdown rate for retirees with more than $200,000 in their account to ensure more of a regular income for retirees “for a number of years (fixed term) or for the rest of [a member's] life.”²

The three main best practice principles are “understanding members”, which we have taken to mean trustees are to gain a deeper understanding of their membership’s composition to develop tailored solutions; “providing quality retirement income solutions”, which we consider is for funds to develop solutions that offer better outcomes for members compared with current systems, and “providing information and guidance” which we see as meaning to help members facilitate simple and informed product choices.

While the principles are not mandatory, once formalised, they could significantly influence how superannuation funds structure retirement income products and communicate their benefits to members.

The fundamental impact of Treasury’s proposal lies in the fact it has the potential to reshape the advice financial advisers provide to clients. Although the draft proposals appear to have been met with mixed sentiment, at Generation Life, we welcome them; they stimulate a much-needed debate on optimising retirement income for Australians. However, the question remains: what could they mean for financial advisers and their clients?

Primarily, we know that there isn’t a ‘one size fits all’ approach for retirement planning, and these proposals recognise the diverse needs and circumstances of retirees. The principles are considered as advocating for flexible retirement income solutions that cater to the varied financial landscapes retirees face. From our experience, it's clear that without a longevity risk product, retirees’ needs and objectives cannot be fulfilled with certainty from the outset. Integrating lifetime income streams with other investment structures can also offer other substantial benefits such as, maximising retirement income - allowing retirees to spend more for longer and potentially enhancing access to the Age Pension.

For retirees and those preparing for their later years, the proposals suggest a shift in how we consider and plan for retirement. The decumulation phase of retirement is not as straightforward as the accumulation phase. Therefore, there is a need for solutions that address longevity and provide tools to help members make informed decisions about their retirement income. This includes finding the right balance of income solutions, and the balance must be based on individual circumstances.

As these principles are debated and refined, it's important for advisers to stay informed and proactive, ensuring they provide the best possible guidance to their clients. Crucially, while member choice is key, education on retirement income strategies should commence well before retirement. Financial advisers can play a key role here, guiding clients through the complexities of planning for their financial futures.

We consider the circulation of the proposals as an insight for product providers, but also for advisers on the future of retirement income policy and an opportunity to reassess and possibly expand the advice they offer now. Only time will tell how superannuation funds will need to incorporate these new principles into their retirement income solutions.

Generation Life stands ready to support superannuation funds. We have developed innovative, flexible lifetime income solutions tailored to the needs of Australians during retirement. Our existing administration systems and relationships with reinsurers offer a robust foundation for new lifetime income solutions without having to start from scratch.

1. Of that in 2017, “Population aged over 85 to double in the next 25 years” ABS https://www.abs.gov.au/articles/population-aged-over-85-double-next-25-years#:~:text=Australian%20Bureau%20of%20Statistics.&text=%22The%20ageing
%20of%20Australia's%20population%20as%20a,million%20and%206.7
%20million%20people%20in%202042.%22, released 22 Nov 2018, accessed 15 April 2025.

2. “Secret Treasury briefings reveal future of pension savings”, AFR 20 Feb 2025 https://www.afr.com/companies/financial-services/secret-treasury-briefings-reveal-future-of-pension-savings-20250213-p5lbyo , accessed 15 April 2025.