Urgent call for ‘a new type of pension’

How wonderful to live in an age where life expectancies are going up and up. And while it’s great to know that medical breakthroughs, green smoothing and quinoa will keep us going well into our eighties and nineties, it does leave us vulnerable to a problem.

Financial experts call it “the longevity risk” and it means we need to save and budget as if we were going to live to a hundred (or even beyond).

Apparently this causes us to save our pennies more conservatively than we possibly need to, reducing our quality of life. Some people may say ‘to heck’ with longevity risk, I’m going to spend my money and rely on the pension when I run out, but for most of us that is a frightening prospect – particularly for those who live in cities where the age pension barely covers the cost of a latte and a power bill. Plus, who knows how much it will be chipped away at between now and then?

But what if you didn’t have to worry about ‘living too long’? What if you knew that you would be looked after well once you hit real old age and could spend what you have up to that point?

That’s exactly what Richard Livingston, founder of financial advice company Eviser says should happen.

“We can keep tinkering with the age pension we’ve got, solve nothing, continuously break promises and bamboozle those trying to do the right thing by being self-funded retirees, but there’s a better way,” he writes in the Sydney Morning Herald.

“We need a new “elderly pension” to provide genuine and generous support for the growing cadre of Australians who will make it well past life expectancy – somewhere in the nineties and beyond.”

Mr Livingstone continues, “Exactly how much an elderly pension should be, or at what exact age it should kick in, is a job for the actuaries. However, it should be set at a more generous level than the age pension, come with a proper standard of health care benefits, have no or only limited means testing and (perhaps most importantly) it should be immune as far as possible from the whims of future politicians.”

What do you think of this idea? Would it make you feel better knowing you’d be well looked after in your 90s and beyond?