The idea was originally proposed by Susan St John and Claire Dale at the University of Auckland’s Retirement Policy and Research Centre.

In the past year, the amount of money being withdrawn by people aged 65 and over increased 43%, to just over $1 billion.

A survey by IRD found most were taking their money out in full.

St John and Dale said that left retirees without protection from the risk of outliving their savings, unsuccessful investments, inflation, financial exploitation or spending their money too early.

Overseas, annuity schemes that drip-fed regular income to members were common, they said, and in some countries, such as the Netherlands, compulsory. Annuities are mandatory in six of the member states of the European Union and voluntary in 15 others.

St John and Dale said New Zealand Superannuation was the “perfect annuity” because it was a secure basic income for everyone at age 65. It was protected from inflation, kept up with wage growth, and continued as long as a person lived. But it was not enough for some people to live on comfortably and did not cover some forms of health care.

They suggested KiwiSpend, which KiwiSaver members would be defaulted into at 65.

They could opt out after taking advice but those who remained in it would receive up to $12,000 a year based on their savings, on top of the pension.

The KiwiSpend amount would increase when they entered a period of high health costs, such as having to go into rest home care, rather than have their other assets depleted to the low threshold required before state support for care kicked in.

Cordtz said the idea was worthy of discussion.

“Many people we’ve spoken to in our research for the Review say they’re worried that they’ll run out of money in retirement.

“An annuity scheme like the KiwiSpend product suggested by St John and Dale may provide members with the peace of mind of a guaranteed income stream in addition to Super. With a long-term health care rider, it could also remove a person’s future health care costs from families and taxpayers in general.”

Ralph Stewart, founder of Retirement Income Group, questioned whether it was right to ask taxpayers to accept the commercial and longevity risk of an annuity product.

“I’m not sure the Government would be that keen on expanding the balance sheet any further.”

He said the private annuity market had flourished in areas where the Government safety net of the pension was not as generous.

The ideal could be for the Government to partner with private annuity providers to share the risks, he said. “I don’t think the taxpayer should do all of it.”