Paying for Retirement: Enhancing the Allure of Annuities

With the federal government's announcement of impending superannuation reforms, the spotlight is again on how to pay for increasingly longer retirements. Since saving for life after work became mandatory in the early '90s, Australians have shown a marked preference for cashing out super. The appeal of investing in an income stream through an annuity has been miniscule. But in Switzerland about 50% of the accumulated pension wealth is annuitised. The "generous" means test for the pension in Australia, in part, may explain the difference, as Monika Bütler, dean of the School of Economics and Political Science at University of St Gallen, told a recent Australian School of Business seminar. But that may not hold if the government keeps changing the rules.