Advisers wary of retirement products
Financial advisers and independent retirement planners remained reluctant to accept retirement product solutions, with only 10 per cent of those advisers using any type of annuity as the main part of their solution, Tria Investment Partners said.
The wealth and asset management consultancy firm's partner Oliver Hesketh said that while Australia was one of the biggest pension markets in the world, it trailed behind other developed markets in offering options for retiring and retired members, and consequently, dealing with the longevity issue.
In comparison with other countries, Australian manufacturers provided fewer avenues for retirees to buy a lifetime (i.e. guaranteed) income stream.
"Whilst a few years ago the market held a consensus view that annuities were unappealing (too expensive, inflexible, complex), that consensus is shifting," Hesketh said.
"Take-up of lifetime annuities is increasing (albeit off a very low base) and CBA's re-entry into that market will provide some welcome competition."
The biggest hurdle was the persistent uncertainty on retirement policy, especially the path of change on deferred annuities.
The deferred lifetime income option fits well with adviser models and helps address the longevity-over-adequacy problem.
Another problem was the excessive focus on price instead of value.
Advisers agreed that the biggest risk was members outliving their savings despite having a good balance, and this risk superseded adequacy.
There was also growing consensus that members pooling risk together was a "win/win" for customers.
"It will be incumbent on product manufacturers to educate advisers on the value being offered by these products, allowing a conversation with members to more accurately weigh the benefits and the costs of longevity protection," Hesketh said.
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