Retirees need advice on retirement products
Retirees will not have access to sound financial advice and may risk making poor decisions and ending up with the wrong product, the Association of Superannuation Funds of Australia (ASFA) said.
ASFA teamed up with State Street Global Advisors Australia (SSgA) to compile a report on the future of retirement income, and concluded the industry must aid retirees with retirement products that produces a stable income stream, provides longevity risk management and cushions retirees against unexpected events.
"It is vital that the recommendations in relation to the super system by the FSI be implemented, regulatory impediments to income streams product development be removed, and the qualifications for financial advisers be reviewed so that increased requirements are placed on those that provide retirement advice," the report said.
The report showed increasing the growth assets and portfolio diversification can have benefits in the retirement phase.
"Many retirees look to reduce the volatility of their portfolio balance and increase the steadiness of income received by increasing the amount of cash and fixed income in their portfolio, however, this will usually shorten the period over which income is paid," it said.
Retirees will experience better outcomes if they are disciplined in withdrawing cash from their account, including selling assets when needed to fulfil income needs.
ASFA also looked at the experiences of retirees of different investment results and found that for a defensive portfolio of 75 per cent cash and fixed income and 25 per cent Australian equities, retirees should be able to drawdown on the lump sum until age 90, provided they can draw a part Age Pension.
Those more pessimistic should have a 75 per cent chance of using up their lump sum invested in the defensive portfolio by 84, while for the optimists there is a 25 per cent chance that the lump sum invested will last until age 105.
This is provided the returns from the portfolio will overtake drawdowns every year.
AUTHOR
Malavika Santhebennur
Recommended for you
Data and technology provider Novigi has acquired Iress’ superannuation consulting and managed services business from Apex Group.
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
