Written

For

The

Australian

-

Retirees’

drawdown

rate

is

under

new

pressure

and

this

time

it’s

from

the

big

end

of

town

Are Australian retirees being too careful with their money? According to some of the biggest names in the investment industry, yes — and they want the government to do something about it.

At the recent Finology summit, I heard a growing chorus of voices from institutional players arguing that the current superannuation minimum drawdown rates are simply too low. The suggestion? Force retirees to withdraw more from their super each year, or slap higher taxes on what's left when they die.

The argument goes like this: retirees are "underspending" in retirement. They're deferring the overseas holidays, putting off the kitchen renovation, and clipping coupons at the supermarket — all because they lack confidence their money will last. Research shows most retirees simply draw the SIS minimum, treating it as gospel rather than a floor. Allianz Retire Plus and Fidelity both made compelling points that the 4 per cent minimum below age 65 anchors behaviour in ways that leave people living smaller lives than they need to.

Fidelity's Richard Dinham went further, floating the idea that future governments could strip tax benefits if too much super is being passed to the next generation — an "unintended purpose" of the system.

Here's where I sit on this. Yes, the tax concessions on super were designed to fund retirement, not create intergenerational wealth transfer vehicles. And yes, many retirees would genuinely enjoy their later years more if they spent with confidence. But there's a big difference between educating retirees and legislating their behaviour.

Bumping the minimum drawdown to 6 or 8 per cent, or hiking the 17 per cent death benefits tax, feels like a heavy-handed fix for what is really a confidence and advice problem. People underspend because they're scared — of markets, of aged care costs, of outliving their money. Forcing bigger withdrawals doesn't solve that fear. It just shifts the money into a bank account where it earns less.