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Retirees need strategies to prioritise income
Generating income is the top priority for pension phase investors but they are concerned about achieving this in the current economic and political environment, according to a survey.
Plato Investment Management’s survey found generating income was the top priority for 94 per cent of respondents, while 67 per cent were concerned about slow economic growth and 64 per cent were worried about the “Trump effect”.
Another 29 per cent expected income greater than seven per cent form their portfolios, followed by 21 per cent expecting six to seven per cent, and 29 per cent expected five to six per cent.
Plato managing director, Dr Don Hamson, said in a low-return and low-rate market retirees needed specialist, high-yield strategies to supplement traditional sources of income like cash or fixed income.
“The achieve the level of income they expect, retirees need to use investment strategies that prioritise income, as well as tap into their status as ‘tax-free’ investors, harnessing the benefits of franking credits to deliver stronger returns,” Hamson said.
Commenting on the new super rules that apply from 1 July 2017, Hamson said pension-phase investors would face a number of challenges as the economic and regulatory environments posed threats to the stability of their investment income.
He said while the S&P/ASX200 would likely generate yields of around six per cent per annum in the near term, a fund designed specifically for the needs of retirees could deliver relatively higher levels of income despite the current market environment.
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The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation as a bequest vehicle.
Superannuation funds will have two options for charging fees for the advice provided by the new class of adviser.
The proposed reforms have been described as a key step towards delivering better products and retirement experiences for members, with many noting financial advice remains the “urgent missing piece” of the puzzle.
APRA’s latest data has revealed that superannuation funds spent $1.3 billion on advice fees, with the vast majority sent to external financial advisers.
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