Only 10% of retirement assets were taken as a full lump sum in 2013-14 according to research by Rice Warner, destabilising the view that many retirees rapidly spend their super and fall back on a full Age Pension.
Used to support its 2016 pre-budget submission, the Colonial First State Income Stream Index research by Rice Warner and CFS found that 83% of the value of all retirement benefits were invested in superannuation pensions and that a further 7% were taken as a partial lump sum. The research also highlighted that at least one third of lump sum payments were reinvested into products such as bank deposits or used to reduce debt.
Rice Warner predicted that by 2025 96% of all retirement benefits will be taken as a pension. Citing improving pension products, concessional tax treatment and growing average account balances as reasons for the shift.
This trend is mirrored by official figures from APRA, which show that the proportion of benefit payments paid to retirees as lump sums has continued to fall from 82% in 2000 to 68% in 2005 and again from 51% in 2010 to 38% in 2015.
Based on these trends, Rainmaker projects the ratio will plummet to less than 15% within two decades.
According to both Rainmaker and Rice Warner the downwards trend suggests that the higher the super balance at retirement the higher the chance the retiree will take an income stream. Instead of taking a single lump sum payment many retirees will instead opt to take a small lump sum payment and direct the rest of their balance to income streaming.
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