Legislation, Retirement, Superannuation

Product not the retirement income fix

Retirement income products Superannuation Actuaries Institute

A number of strategic elements must be combined rather than just product to formulate a satisfactory retirement income solution.

A solution to providing better retirement incomes for Australians cannot be product based and must incorporate a number of other strategic investing elements, a senior superannuation executive has said.

“A lot of the commentary around retirement incomes, some even evident in the Treasury consultation paper, tends to be product led. The reality is there is no retirement income product that is a silver bullet,” Gale Force Advisory principal Andrew Gale told delegates during a panel discussion about retirement matters hosted by the Actuaries Institute in Melbourne yesterday.

Gale pointed out a layering of certain elements will most likely be the best approach to finding a solution involving the adherence to a particular sequence that will potentially deliver the optimal outcome.

“The sequence should always be basically [understanding the individual] the best you can, broad strategy, portfolio construction, a combination of products, [but placing] products last,” he noted.

“Too often we’re having a product discussion upfront.”

Fellow panellist Deloitte actuarial consulting partner Andrew Boal acknowledged the development of new products to generate retirement income is not needed and suggested a focus on understanding the needs of retirees better is critical in arriving at a solution.

“A combination of all the products we’ve got out there in the marketplace right now [means] we can build the right [retirement income] solution for everyone,” Boal said.

“[But] if we get more data we can come up with the right blend of the products to build a solution that will contain a combination of two or three building blocks from different products.”

According to Boal, the gathering of a greater amount of information about retirees will allow a standard combination of products that can deliver a base-level retirement income to be determined, as well as provide the scope for this mix to be tailored to an individual’s particular needs.

“The default might be 80 per cent in this and 20 per cent in that and then the person can say ‘that’s fine, but I want 78 and 22’ [per cent and the response can then be] ‘fine, go for it’,” he said.

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