PEOPLE will be able to take out insurance against living longer than their superannuation lasts, under reforms being considered by the Gillard government.

Assistant Treasurer Bill Shorten said he had “heard loud and clear” the industry’s calls for government action to improve the range of financial products available for people to draw down their superannuation.

“There is not a lot of point in building up a great system if, in the drawdown phase, there is inequity and challenges to the sustainability of the system,” Mr Shorten said.

The Henry review said rising life expectancy meant new financial products were required to enable people to finance their retirement. The industry has been pressing for the government to allow superannuation funds to offer deferred annuities.

Challenger’s head of government relations, David Cox, said that a person retiring at age 65 who was worried that their superannuation savings would only last their expected life span until 90 years could, for an outlay of $10,000 on retirement, buy an annuity that would deliver half the age pension from 90 years for as long as they lived.

Start of sidebar. Skip to end of sidebar.

End of sidebar. Return to start of sidebar.

These products were banned before now because of fears they may be used for tax deferral. However, Mr Cox said safeguards could be introduced.

Mr Shorten said there was a need for Treasury and industry to work together on new products for the “drawdown” phase of superannuation so that “people don’t work hard their whole life and retire poor”.

Lateral Economics chief Nicholas Gruen, a Keating-era economics adviser who helped devise the super system, called for workers in their 20s and 30s to be able to use their super as a house deposit and for the government’s “Mickey Mouse” first-home saver scheme to be scrapped.

Dr Gruen, who served as an adviser to former treasurer John Dawkins, said young people’s superannuation guarantee payments should be channelled into compulsory savings accounts to finance house deposits.