A superannuation industry leader is proposing a controversial change to the way your super is managed – and it may not be what you want.
Paul Schroder, chief executive of the nation’s largest super fund, AustralianSuper, has called on the government to come up with ways to automatically move retiring fund members onto a new type of retirement product that pays an ongoing income, The Sydney Morning Herald is reporting.
Mr Schroder told the Australian Securities and Investments Commission’s (ASIC) annual forum that such a move could tackle two problems facing the super industry – increased government pressure to provide lifetime retirement income to members and a looming shortage of financial advisers.
Under the current arrangement, when members retire it is usually up to them to do their own research on what they wish to do with their nest egg, or to seek financial advice.
But with the number of financial advisers dropping substantially in recent years, and with an estimated 3.5 million Australians expected to retire in the next 10 to 15 years, access to financial advice will be harder to source.
This will inevitably lead to thousands of financially inexperienced retirees either choosing the wrong option for their money, or not maximising the potential. A consequence is people running out of money in retirement and relying on the Age Pension.
Which is why regulatory measures such as the MySuper performance test and the Retirement Income Covenant were introduced.
But they put the onus on super funds to ensure members have options in retirement to make their money last as long as possible. Mr Schroder says this will become increasingly difficult with a future financial adviser shortage.
Setting members up to automatically transfer to a retirement income product – without the need for a financial adviser – would be one way to alleviate this problem.
“Inside our fund, there’s 477,000 people who are over 50 with more than $50,000 in their balance,” he said.
“You just won’t have enough advisers to put enough people in income products.
“We’re going to have to come up with, in my mind, a radically different model.
“And when I look at what our members keep telling us, I think we need to think about something like automatic income.”
He stressed the idea was not to place people into annuity products, but in new products offered by the funds. Regardless, such products appear to behave in much the same way.
The YourLifeChoices Older Australians Insights Survey 2022 revealed a majority of older Australians (58 per cent) would not consider purchasing an annuity.
This was an increase on the previous year’s survey, indicating the mood for annuities and annuity-type products may not be there.
Perhaps an opt-in/opt-out option would work better than an automatic transfer? Whatever the answer, it’s clear more work needs to be done in this area if the government wants as many Australians as possible to enjoy a comfortable retirement.
Does this sound like a reasonable plan to you? Would you be happy being automatically moved to a retirement income product? Let us know in the comments section below.