The Government should amend the tax system to help Australians build their retirement savings, Financial Planning Association (FPA) chief executive Mark Rantall has said in an address to the Tax Forum.
Rantall’s core recommendations were that the Government introduce incentives to encourage Australians to seek financial advice; and improving tax and superannuation laws to encourage the development of more innovative products to counter longevity risk.
Cost is currently a significant barrier for low to middle-income earners seeking financial advice, and improving their access to advice would help boost their retirement savings and take pressure off the age pension, he said.
The Government’s Intergenerational Report published last year projected that by 2050, 6.1 million Australians aged over 65 would be receiving a full or part age pension, which highlights the need to bridge the advice gap for pensioners, he said.
The Government could improve access to advice by allowing Australians to pay for advice with pre-tax dollars via salary sacrificing; introducing tax deductibility for financial planning fees; using a percentage of the current superannuation co-contribution payment to fund a ‘one-off’ superannuation advice fee; and directly subsidising financial advice for low-to-middle income earners, according to Rantall.
The development of better retirement income products has been hampered by the current superannuation and tax legislation which overly restricts the definition of ‘income stream’ and the eligibility of certain pension assets for tax relief, he added.
"In particular, the FPA would like to see legislation amended to allow providers to develop ‘deferred annuities’ and other ‘longevity protection’-style income streams, where individuals can choose when to begin retirement income payments," Rantall said.
