The head of an Australian financial service firm's life operations, Richard Howes, is an advocate of compulsory annuitization.
Howes believes that 30 percent of retirement funding should be compulsorily assigned to guaranteed income streams--in other words to annuities.
Howes also suggests that the relatively slow take-up of annuities in the Australian market is a result of investors who have been conditioned by a uninterrupted 20 year bull market in equities.
Howes spells-out the case for annuities:
"the key features of annuities in that they provide certainty of income, certainty of capital and protection, therefore against market risk and longevity risk would prevail. Annuities can be customised to be linked to inflation and the term can either be for your whole life in the case of a lifetime annuity or it can be customised to have a fixed maturity date and a fixed capital draw-down. I would expect that in the event there was compulsory annuitisation, a highly competitive annuities market would emerge with all of the key players entering the market and a range of products being available to retirees."
Source: Business Spectator
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