No silver bullet in retirement product
There has to be a combination of efficient product solutions and effective advice solutions to foster a healthy retirement income system, State Super Financial Services managing director, Michael Monaghan, said.
Monaghan believes there is no silver bullet in terms of product, adding the product is not the real solution.
"There's no single product that is ever going to deal with that carefully.
"What we need is a combination of product solutions that are efficient and advice solutions that help people through that process," he said.
Monaghan said advisers have to take a counter-cyclical approach to retirement investment strategies that allow clients to avoid having to draw down on their assets when markets are down, and take profits on assets when markets are up.
"There's a tremendous pressure on people from media and talking to their friends often to follow the herd and let people see the investment markets going up and so they might take more risk and put money into shares at that point in time," Monaghan said.
Having said that, Monaghan believes the product definitions between annuities and allocated pensions are too rigid and tightly defined, and have to be loosened up from a regulatory perspective to foster innovation in retirement income.
He said capital requirement restrictions in the annuities space prevent the industry from being able to offer annuities at a reasonable price.
The retiree landscape is changing, with many continuing some form of work even after retiring.
In light of this, there should be an option for people not to draw so much from their pension in their early years, with the expenditure being deferred to later in the retiree's life.
"Things like that would be quite useful in terms of freeing up some of the restrictions around products," Monaghan said.
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