Cheap retirement-related financial advice that is available to the mass market should be part of Australia’s retirement income system and included in the pending review of the sector, according to the Actuaries Institute.
Actuaries Institute retirement strategy group convenor and public policy committee member Andrew Boal said low-cost, single-issue advice should be a built-in component of the Australian retirement income model and cost only a few hundred dollars to access.
“We need a regulatory framework that allows for affordable access to information and guidance for the majority of retirees,” Boal said.
“That advice could cost as little as $200 to $300. It could be single-issue scaled advice or a modified version of intra-fund advice,” he added, stating the commonality of issues for pre and post-retirees could help drive down the cost of advice.
“While the retirement experience is generally quite heterogeneous, there are still a lot of people in quite large cohorts who have very similar circumstances with similar needs in retirement.
“We should be able to come up with a system to give people the guidance they need at an affordable price.”
He added only the top 5 per cent to 10 per cent of people saving for retirement had a financial situation that was sufficiently complex to justify more expensive advice.
In a paper released by the institute today, Boal pointed out that despite Australia having a leading system for building savings for retirement, many people still struggled with a retirement ‘spending system’, and that in the next 20 years more than 60 per cent of superannuation balances at retirement will reach $250,000 or more in today’s dollars.
He said the pending final report from the Retirement Income Review should give the federal government enough information to improve the cohesion of the system and ensure all parts of it work together to deliver fair outcomes for all retirees.
“The system needs to be efficient so that the cost to taxpayers meets its core objectives: it must be affordable and sustainable, and produce adequate outcomes that still allow some flexibility to meet an individual’s needs, and be simple enough so that retirees can optimise their position without having to spend a lot of money on advice,” he said.
The government’s Retirement Income Review panel, announced in mid-2019 and tasked with looking at the interplay between the age pension, compulsory superannuation and voluntary savings, is expected to hand its final report to the Treasurer later this month.