A report by asset consulting firm Mercer has found that one in four Australians will outlive their retirement savings by 11 years. It also found that a full 50 per cent of retirees will live out their days with less than they would have hoped for.. Making this worse, the report noted Australians are retiring earlier and living longer than we expect.

40 per cent of people are being pushed into retirement by redundancy or health problems.

David Anderson, of mercer, said of the report, “Longevity risk is a huge threat to Australians’ quality of life in retirement … Once savings run out the age pension will only provide about half the amount required for a comfortable lifestyle. What happens when medical expenses increase or aged care is required?”

The problem retiree’s face is in finding the balance between revenue producing income and the risk profile they are prepared to accept for that income. As people get older they become more risk –averse; however, the smaller the risk, the smaller the return.

The historically low bank deposit rates aren’t helping. Nor the lack of income producing innovation.

The NAB and Mercer, however, are currently considering a strategy to make unrated corporate debt markets available to investors. This will allow any people to buy long-term bonds in a business with a debt facility – once the due diligence has been done and cleared by the bank, essentially benefiting them both: Resuscitating cash for the beleaguered business, low-risk, long-term income for the investor.

NAB will be able to use its debt trading acumen to allow investors access to ‘after-market’ liquidity in the unrated bonds market. These bonds are usually difficult to fund and thus the bank also benefits from the injection of investor cash.

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