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Retirees’ needs not being met
There is a significant gap in product choices for those moving into the pension or the de-accumulation phase of retirement, according to the Financial Services Council CEO John Brogden.
Brogden said as a large cohort of people move into the drawdown phase they are going to start asking the age-old question of "how long am I going to live for?"
"We need to have comprehensive policy settings on the drawdown phase and I don't think we have them. I don't think that will be a discussion that will happen in five minutes. I think that will be a long discussion," Brogden said.
It is time to move from the current discussion of accumulation to a focus on retirement income or retirement outcomes phase, Brogden said.
The comments come as the FSC-DST CEO Survey 2014 found that 77 per cent of CEOs believe the superannuation sector is not ready for the huge increase in the demand for retirement products.
He believes a MySuper type default retirement product might be the right solution to urge retirees to go for income streams instead of lump sums.
"Europeans are stunned that we give people lump sums. They're stunned that we risk people losing all their money, and all of their retirement savings overnight," Brogden said.
He added, however, that while there is no evidence of retirees splurging their lump sums overnight, the real issue is whether the lump sums are lasting as long as possible.
Brogden also considered the option of forcing people to annuitised pensions or annuities, but said the move would be a "big shift, and there would be political consequences to that".
"There are tax issues that need to be cleaned up with respect to annuities. And we're very keen to have that happen. We think annuities should not be tax-penalised to people. They should have that option," he said.
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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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