Ask Paul: I want to invest in annuities but should I trust them?

Hello, Paul, it's Harriet here, in Perth, planning to retire in a few years.

Just wanting to know if the Australian government is involved with annuities or if they operate individually.

I would like to go for annuities, but don't feel confident to venture there if the government doesn't have a hand in it. I am worried about outliving my super. - Harriet

Annuities are a really interesting area, Harriet. Many share your feelings about the security of their money.

I quite often have people asking me if they can trust private providers, even if they are some of our largest institutions.

I was recently reading an article by National Seniors with the headline 'Will government annuities take stress out of super?'. You won't be surprised to hear that the report states that 80% of Australians find retirement planning complicated.

The Grattan Institute, a well-known think tank, shares your view.

It recommends that the government offers an annuity paying a guaranteed income for life.

Part of the Grattan Institute's concern is that too many retirees are not enjoying the savings they have built up in super and our super system has become a vast inheritance scheme.

I can't argue with this. Over my 40 years of talking to people about money, outliving their savings is a major fear, so very sensibly we take a cautious approach to spending.

Thankfully, we have a good safety net in the age pension system, so this lessens the fear of spending our savings, but it does end up with many retirees restricting their lifestyle unnecessarily.

A government-backed annuity would greatly help this situation for many people.

It would give you confidence in the security of your money and an income stream for life that you could confidently spend.

My hope is that this option will be available for you and all retirees as you reach your retirement date, but regardless of the government taking this step, I think you will find many more secure annuity options opening up.

Get stories like this in our newsletters.