iscoverA leading SMSF auditor has said the Grattan Institute’s recent proposal to Treasury, suggesting that retirees be directed to put 80 per cent of their super balance above $250,000 into annuities, raises serious concern.
Naz Randeria, director of Reliance Auditing Services, told SMSF Adviser that on the surface, the institute’s proposal looks like a plan to give retirees more financial certainty, but in practice, it risks doing the opposite.
“We’ve just spent years trying to unwind rigid legacy pension products like defined benefit pensions, lifetime complying pensions, and market-linked (term allocated) pensions structures that locked retirees into inflexible arrangements that no longer reflect modern retirement needs,” Randeria said.
“Now, with this push toward annuities, it feels like we’re walking backwards.”
Randeria continued that for SMSF members and trustees, flexibility and control are the main drivers, as is the recognition that retirement isn’t a “one-size-fits-all situation”.
“Every retiree has different needs. Some want to manage aged care costs, help family members, or keep funds accessible for unexpected expenses.”
With the economy and productivity high on the government’s agenda, she said the timing of the proposal is “highly questionable”.
“Inflation is still elevated, government finances are under stress, and markets are volatile. Annuities are being sold as the ‘safe’ option, but they’re only as safe as the system that backs them. If the government becomes the de facto underwriter of these products, it sets up a dangerous cycle — one that starts to look like a Ponzi scheme,” she said.
“As obligations grow and the system becomes harder to sustain, the government will inevitably look for new revenue sources. That’s when we’ll see more policies like Division 296, new taxes dressed up as reform, introduced to plug holes in promises.”
The arbitrary limit of a $250,000 threshold unfairly targets middle-income Australians while doing nothing to address real inequalities in the system.
“Worse, it adds another layer of complexity at a time when retirees are already grappling with significant changes. First, we’re introducing punitive taxes like Division 296 that penalise those who’ve saved responsibly. Now we’re telling them how they’re allowed to spend their own money? It’s not reform, it’s control,” Randeria added.
“What worries me most is that these kinds of policies seem to come from people far removed from what retirees are actually dealing with. Many think tanks are full of academics and former public servants. They may have good intentions, but most have never sat with a retiree trying to figure out how to make their money last or how to plan for aged care.”
However, Randeria said she does support some of the ideas the Grattan Institute proposed, such as a government-funded guidance service like the UK’s PensionWise.
“Many Australians don’t get quality retirement advice, and having a trusted, neutral source of information would make a real difference.”
“I also think we need more transparency around retirement products – something like performance benchmarking for account-based pensions could help. But the bottom line is this: superannuation is personal. It’s money people have worked their whole lives to save. Any reform must protect their ability to choose what works for them – not funnel them into products that may not fit.”
