New Bill bolsters retirement income

A new Bill backing the viability of retirement income has been tabled before Parliament.

Introduced in Parliament on November 29, the Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 proposes three main measures to lifetime income streams, the work bonus and pension loans scheme.

The Bill is proposing a new means test rules ahead of a wider range, and possibly more complex income stream products expected to emerge in the near future.

Currently the means test rules for lifetime income streams apply to simple products, such as lifetime annuities, the explanatory memorandum shows.

The new means test rules aim to strike a balance between encouraging the development of pooled lifetime income stream products, and ensuring that the assessment of pooled lifetime income streams is fair and reflects the value of the products, it said.

Under the income test, the new means test rules will assess 60% of payments from a pooled lifetime income stream as income.

Under the assets test, the new means test rules will generally assess a proportion of the total purchase amount for the pooled lifetime income stream, while 60% of the purchase amount will be assessed at the point of purchase.

As for the work bonus, the Bill proposes to increase the amount from $250 to $300 per fortnight and extend its application to "all income from gainful work that involves personal exertion."

This means pensioners who aren't gainfully employed will be able to benefit from the work bonus in the same manner as pensioners who work.

Mercer said it welcomed the legislative changes promoting long-term retirement income.

It changes how the value of longevity products is calculated for the assets and income tests relating to the Age Pension, and provides fair and appropriate means test outcomes for all pooled lifetime income stream products, Mercer said.

Senior partner David Knox added the legislation paves the way forward to secure long-term retirement income. "Superannuation funds and financial services providers now have an incentive to develop products that provide certainty in retirement income."

"It also provides a behavioural incentive for Australians and financial planners to make decisions that benefit their long-term financial wellbeing. It gives them a nudge to think about longevity products as part of the retirement-income mix," he said.

Read more: Retirement incomeMercerAge PensionDavid KnoxSocial ServicesSuperannuation
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