In a paper published ahead of the release of the Treasury’s Retirement Income Review report, the Actuaries Institute has stated that super funds should include a longevity-based product in their retirement income offerings and provide retirees with greater levels of low-cost financial advice to help improve living standards for older Australians.
The author of the paper, Anthony Asher, stated that super funds have so far been reluctant to offer products with longevity risk cover due concerns that lack of demand would lead to scale risks or result in members not having access to the lump sums needed for large purchases or transitioning into aged care.
Some of these concerns could be addressed by allowing super funds to offer more comprehensive advice to their members. Mr Asher notes that members are “poorly served” by the current system, which often prevents funds from offering any kind of advice.
The current AFS licensing rules, he said, make giving guidance or advice to individuals difficult and expensive.
“Allowing superannuation funds to safely provide a wider range of personalised support is important. This could include personalised education,” Mr Asher said.
“Research shows that superannuation funds are a trusted source of information and help. Indeed, thought should be given as to ways in which the current position should be reversed.
“Members and their beneficiaries are prejudiced by the absence of options to obtain a suitable income stream product, and trustees should be at risk if they fail to make such an option salient.”
Mr Asher suggests that these changes could be assisted by creating “significantly more prescriptive guidelines” on what a retirement income strategy looks like for different members, similar to how ASIC provides sample statements of advice for advisers to refer to.
