Susan St John, co-director of the Retirement Policy and Research Centre, spoke at last week's retirement policy forum.
She said New Zealand was had “missed the boat” because KiwiSaver was not introduced with an associated decumulation provision.
“There should have been a quid pro quo that recognised that the initial sweeteners to get into KiwiSaver justified restrictions on how the lumpsum could be used. Ideally, people should have been forced to have a proper decumulation plan that produced income in retirement that continued as long as they lived," she said.
In the past she has called for a Government-backed KiwiSpend system to help people make their KiwiSaver savings last.
“Past retirement income reviews have mentioned lack of suitable decumulation products . As well the RPRC has written on this and hosted various forums and workshops but there has been little interest from the Government. This maybe that there is no widespread appreciation of the nature of the problem, and a misplaced faith that a pure private market will come up with answers."
The private market could not provide the extent of what was needed, she said.
“Insurers differentiate on gender because they can. Women don’t get as much annuity for a lump sum as a man. But NZ Super is gender neutral and what is needed is gender neutral annuities.
“Another problem is uncertainty around extended and expensive life and health care. People should be able to insure this. But the private market won’t do it without Government intervention.”
If the KiwiSaver default was to enter a decumulation product, people were more likely to stay there, she said.
The infrastructure was already in place, she said, with the FMA regulating and IRD acting as a clearing house for KiwiSaver.
"A limited lifetime income stream could be offered as the default for the use of lumpsums. This could have attractive features with some degree of subsidisation to ensure inflation proofing and state underpinning to provide certainty."
St John said it was not enough to talk about the issue with every retirement policy review.
There should be an ongoing taskforce set up to monitor changing demographics and the implications for policy.
"It's become past urgent to look at these issues."
