Many Australians not getting allocated pensions advice
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The financial planning sector needs to “lift its game” in advising clients on the benefits of an allocated pension (AP) during the transition-to-retirement (TTR) phase, according to AMP director wealth management products, Andrew Hobern.
There is a “large proportion” of Australians over 55 who have not yet been advised on the various benefits of an AP during the transition-to-retirement phase, Hobern said.
As a result, many of these people are leaving their money in a super fund during the TTR phase simply because they have to have a fund, he said.
“They could instead be getting significant advantages from moving to an AP and taking advantage of the various advice strategies around those products.
“An AP has significant benefits, particularly in the lead-up to retirement, and I am talking here about the 10 years prior - not just at the point of retirement,” he said.
“The value an adviser can give at the TTR phase is very significant, often being able to increase someone’s retirement income by up to 20 per cent.”
The primary benefit is the difference in tax rates between having your money in super as opposed to an AP, he said.
“You pay 15 per cent tax on the earnings in a super fund, whereas in an AP there is no tax paid on the earnings of the underlying fund.
“Effectively you are thereby getting a 15 per cent tax benefit by putting your money into an AP.”
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