The federal government is being urged by the Actuaries Institute in its pre-budget submission to address two national priorities in the coming budget: removing barriers to allow ageing Australia to better prepare for retirement with realistic annuity options; and creating a temporary national insurance pool for high flood-risk properties.

Annuities reform a priority for ageing Australia

The institute has flagged as a budget priority a number of tax and regulatory reforms needed to deal with Australia's ageing population funding challenges by facilitating the development of annuities products.

In its submission, the institute has reminded the government that under the current superannuation system, Australians face two huge challenges to meeting their financial goals in retirement. Firstly, the risk that they will outlive their savings, and secondly, the risk that they will lose their superannuation capital due to market movements, of particular concern in the context of ongoing global economic volatility.

Institute CEO Melinda Howes has emphasised the importance of pushing ahead in the coming budget with regulatory and tax reforms which will give Australians greater access to annuities - a type of investment which address both these key risks while also reducing the strain on the government-funded Age Pension.

"Australians tend to take their superannuation balances as a lump sum on retirement - which puts pressure on the Age Pension because it makes it harder to manage retirement savings versus spending," said Howes.

"But new generation annuities can address key needs in retirement, enabling retirees to better manage their retirement savings and protect against longevity and market risks."

National flood insurance pool must be created

Echoing its submission to the Natural Disaster Insurance Review last year, the institute believes further government intervention in the flood insurance market is necessary due to high risk properties becoming uninsurable, and that a flood insurance pool is the best option to addressing the numerous challenges in this market.

"The institute strongly recommends that the government create a national flood insurance pool, which could be funded by a mix of a small premium increase across the board, council and taxpayer levies, or direct Government funds," said Howes.

"This pool should go to subsidising the premiums of those living in high risk areas, and in years where pool funds are in surplus, they can be used to pay for flood mitigation and risk reduction such as relocating properties and building dams and levies."

The institute continues to prefer this option over direct government subsidies of premiums which has also been suggested as an alternative solution.

"As we've tried to underline, the problem with direct subsidies of high premiums is that there is no way to tie these subsidies to risk-reducing activity of either individuals or councils - in some cases it might encourage more development in dangerous areas," continued Howes.

"A flood insurance pool model can make subsidies conditional on acceptable risk-reducing activity being undertaken by property owners and the local council involved."