Australia must adopt a range of reforms to cope with the financial pressures of an ageing population, according to a white paper from the Actuaries Institute.

Institute CEO Melinda Howes says the implications of the emerging “longevity tsunami” are not fully understood.

“Australians are already one of the longest-lived populations on the planet and our longevity is steadily improving,” she said.

The country ranks fourth on life expectancy tables behind Japan, Switzerland and China/Hong Kong, according to the paper.

“By 2050 almost a quarter of the population will be aged over 65, compared with 14% now,” she said. “That will result in government spending increasing from 22.4% of GDP now to 27.1%.”

The institute says longevity is underestimated by the Australian Bureau of Statistics, which puts life expectancy at birth as 79 for males and 84 for females.

The paper says “retirees aged 65 now will live until 86 for men and 89 for women. By 2050 the average life expectancy for people aged 65 is projected to have improved to 92 for men and 93 for women.”

The institute puts forward a number of recommendations.

“We’ve focused on very pragmatic things the Government can do without a big budgetary impact,” Ms Howes told insuranceNEWS.com.au.

Currently there is no disincentive for retirees to take their superannuation benefits as a lump sum after they turn 60. The paper says this poses the risk of unwise spending, the premature exhaustion of superannuation and reliance on the aged pension.

“The Actuaries Institute believes the Government should introduce disincentives for individuals with assets above a threshold amount to take a large proportion of these as lump sums,” the paper says.

It calls for people to be encouraged to invest in products providing income streams such as immediate or deferred lifetime annuities, and for the updating of annuities regulation.

The paper notes the Government will increase the eligibility age for the aged pension to 67 over six years from 2017. The institute calls for further increases as levels of health and life expectancy rise.

The institute also wants the preservation age in superannuation to be kept at three to five years below aged pension eligibility and suggests it be moved to 62 by 2023.

It calls for annuity-style products to be added to MySuper default superannuation accounts, to allow flexibility and control of capital in the younger retirement years and provide a guaranteed income in later years.

People must be encouraged to work longer, the paper says.

It recommends the removal of age limits on super contributions, changing the pension means test and the consideration of an increased aged pension or a lump sum for those who work past the retirement age.

Ageing is also an issue in China, where Ms Howes says the population “will age over the next 20 to 30 years as much as Europe’s did in the past 100 years, due to the one-child policy”.