Deferred lifetime annuities are back on the drawing board, with the release of a Treasury discussion paper yesterday outlining policy options for the extension of retirement income tax exemptions to deferred annuity products.Treasury has called for responses to a proposal that tax concessions be extended to deferred annuity products that could only be purchased with superannuation money, have a minimum deferral period and would be non-commutable.The previous government had introduced measures to facilitate the development of a deferred annuity market as a way of helping retirees deal with the growing problem of longevity risk.However, in December the Government announced that it would not proceed with Labor's proposed changes. Now the issue is back on the table.The Treasury discussion paper said that, as Australians live longer in retirement, their savings face greater exposure to investment risk, inflation risk and longevity risk."Retirees are likely to benefit from increased choice in retirement income stream products that can help them manage these risks," it said.When an income stream product is purchased with superannuation money, income derived from assets supporting the income stream is tax-exempt. Account-based pensions are the dominant income stream products in the Australian market. They are managed investments with a minimum annual drawdown that varies with the age of the account holder, ranging from four to 14 per cent.Account-based pensions are popular because they are flexible - money can be withdrawn at any stage and investment options can be changed. Another attraction is that on the account holder's death the account balance transfers to their estate.On the downside, the account holder bears all the investment risk and the minimum drawdown requirement means that account holders have to eat into their capital in years when market returns are low.The other main product (with a much smaller market share) is a guaranteed income stream (or annuity). The advantage of these products is that they can provide a guaranteed income for a fixed term or for life. On the downside, however, the money is locked away for the term of the annuity and capital requirements associated with the income guarantees impose costs that tend to reduce the income returns.The tax exemptions available to superannuation income products come with a number of restrictions on product design. A basic principle is that the income stream should represent a series of regular annual payments starting from the date of purchase; account holders should not have the opportunity to defer income for long periods.Deferred lifetime annuities, where payments start 15 or 20 years after the product is purchased, are precluded by the current rules.The paper proposes that the income tax exemption could be extended to deferred annuities on condition that they could only be purchased with superannuation money.It proposes that deferred annuities could be purchased through a series of annual premiums, rather than only as a single lump-sum purchase. This could make the product more attractive to retirees.The paper supports the imposition of a minimum deferral period, such as the shorter of 20 years or the number of years