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Change super accumulation phase mentality: UBS
Financial advisers and superannuation funds must strive to modify clients and members' mentality to ensure they understand that superannuation is an income stream in retirement rather than a balance in an account, UBS said.
UBS Asset Management head of Australasia, Bryce Doherty, said this would require time as the superannuation system, while not in its infancy, was perhaps in its adolescence since compulsory super was introduced in 1992.
"Because super has been around for that amount of time, a lot of the focus in super has been on the accumulation phase of super and so people really look at it as an account balance and they're looking at it as a ‘how much is my asset overall'," Doherty said.
Doherty said some of the large superannuation providers were steering their members in this direction by providing annual and quarterly statements on super balances, with many of them indicating what this could mean in terms of the amount of income members would be able to draw down per year if they retired at a particular age.
"But I think there's a long way to go to get Australians to really understand that superannuation is about providing an income stream for you in retirement and what level of income you will need in retirement," he said.
A gap also remained in understanding the level of income members could derive of their super at retirement, given members could have generated seven to eight per cent off risk-free assets 10 to 20 years ago.
"You can't do that today. So every year the interest rates stay lower, that means that there's less income being generated off super balances for retirees," Doherty said.
Doherty said limiting the amount of concessional, but particularly non-concessional contributions that members could make into their super account gave them a headwind in generating the required balance for a comfortable retirement.
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