The recently released Retirement Income Review revealed that as at June 2019, around 71 per cent of people aged 65 and over received the Age Pension or other pension payments and more than 60 per cent of these were on the maximum rate.
The review did not make any recommendations, but the 638-page document included many observations about retirees accessing the equity in their home to fund their retirement.
There could, however, be another way to increase the number of self-funded retirees and reduce the number of those relying on the pension, and the key could be as simple as providing more people with professional financial advice.
New CPA Australia research, conducted with independent research house CoreData, revealed that greater access to professional financial advice could increase personal incomes, deliver half a trillion dollars to the economy, and reduce reliance on the Age Pension.
A survey conducted by YourLifeChoices and Challenger in the middle of the first wave of the coronavirus pandemic in April 2020, found that those who had spoken to an adviser were more likely to be confident or very confident that they would be able to sustain their lifestyle for as long as they live.
They were also much more likely to report being happy with the amount of money they had for retirement.
However, Dr Jane Rennie from the CPA said that over 60 per cent of the Australian population did not currently receive professional advice.
The research involved modelling the impact of making professional advice available to the entire population.
Professional advice included accounting, taxation, financial, superannuation, business, and mortgage broking advice.
The modelling found that if properly implemented professional advice was available to all Australians, spending on the Age Pension could be reduced by 21.6 per cent and the economy would be boosted by $630.3 billion per year.
“While the potential economic benefits are tremendous, realistically it’s unlikely we will ever have a fully advised population,” Dr Rennie said. “However, any increase in the uptake of professional advice from its current level could deliver an economic windfall.
“If an additional 10 per cent of the population received properly implemented professional advice, the potential contribution to Australia’s economy could be approximately $112.8 billion per year.”
The research also found that retirees could add an additional 35.7 per cent to their annual income by seeking out professional financial advice.
“Our survey revealed improvements in almost every aspect of people’s lives when they receive professional advice,” Dr Rennie said.
“Respondents reported benefits to their physical and mental health, family and social life, relationships and work satisfaction from receiving professional advice. The impact was even more pronounced for women.”
The survey of 1244 consumers also explored the reason why more Australians don’t seek professional advice and identified a range of barriers including a widely held belief in their own abilities, affordability and a lack of trust.
These figures are also reflected in YourLifeChoices’ Financial Literacy Survey, which found 86 per cent of members managed their own financial affairs and over 70 per cent said they had managed their finances well or very well in the past few years.
Have you ever sought professional financial advice? Did it help you better plan your finances? Would you have been worse off without it? If you haven’t sought financial advice, what is the main reason you haven’t?
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