Super funds could become active in aged care insurance under retirement planning reforms proposed by an industry body.

Arrangements such as lump sums and annuities should ensure people can afford aged care, particularly residential facilities, the Association of Superannuation Funds of Australia says in a new discussion paper.

“Funds should also be able to offer insurance cover for aged care costs, along with more traditional death and disability insurance, should such products begin to be offered in the Australian market.”

The discussion paper marks the start of a five-month consultation on plans to help the retirement system cope with an ageing population.

“There are a number of ways the system can be improved and simplified,” the paper says.

“There also needs to be a discussion as to how a person’s super balance does, and should, interface with healthcare costs and aged care costs [and] access to social security benefits.”

A modest retirement lifestyle allows “fairly basic” activities, while a comfortable one should allow for private health insurance at the top rate and activities such as dining out and taking overseas holidays, the paper says.