Why Australia’s retirement ecosystem needs ‘reimagining’

retirement Actuaries Institute treasury Superannuation

6 December 2023
| By Jasmine Siljic |
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Two actuaries have urged for an overhaul of the current retirement framework to better prepare Australians for the future and improve the accessibility of general financial advice. 

The Actuaries Institute’s Retirement Matters dialogue paper explores why Australia’s retirement system needs to be reimagined, with longevity as the underlying driver.

Written by Andrew Gale, former Self-Managed Super Fund (SMSF) Association chairman, and Stephen Huppert, independent superannuation adviser, the two argue the current framework is failing to sufficiently prepare Australians for when they stop working.

“Retirement has evolved significantly, and many people will choose not to follow conventional retirement patterns. The needs of people who have 20 to 30 years of retirement ahead of them are going to be very different to those who in the past had only a decade or so. It’s time to reimagine retirement and get the system up to scratch,” Huppert explained.

Building on the Quality of Advice Review (QAR) and the Retirement Income Covenant (RIC), the paper proposes that a framework for help, guidance and advice (HGA) needs to be developed.

This would improve the accessibility of general advice for those seeking overall guidance on retirement issues such as the best age to retire or paying down debt.

Gale said: “People are often after some general guidance about retirement planning rather than comprehensive financial advice, which can be hard to get and expensive. 

“An HGA framework would make it easier for people to obtain the support they need. This remains a real need even after the QAR report and the government’s response to the report.”

Harnessing super funds for both advice and guidance is a critical step to this, Huppert added, however regulation remains an obstacle.

“[Super funds] want to do more, but they’re really bound by legislation about what they can do,” he told Money Management.

Last month, the Minister for Financial Services, Stephen Jones, doubled down on plans for super funds to provide advice despite mixed reaction from the industry.

“[Super funds] are on a journey and need to step up the service they provide. They are not there yet,” Jones remarked.

On the same day as the Actuaries Institute’s paper release, the Treasury announced a Retirement Phase of Superannuation discussion paper.

This seeks to increase the focus on the retirement phase by examining:

  • Supporting members to navigate the retirement income system.
  • Supporting funds to deliver better retirement income products and services.
  • Making lifetime income products more accessible.

Expanding the three-pillar system

The actuaries paper also argues that Australia’s three-pillar retirement income system (the Age Pension, compulsory super and voluntary savings) should be expanded.

“The big challenge we have is how to best fund incomes in retirement in the future. It’s time we give more attention to additional sources of retirement income, such as part-time work and home equity, which would provide an additional two ‘pillars’ to our existing three-pillar system,” Gale said.

Part-time work also offers benefits outside of financial support, such as a sense of purpose and connection to the workforce, Huppert told Money Management.

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