Advisers must keep tabs on post-retirement product innovation
Advisers in the SMSF space will need to consider getting more comfortable with new types of retirement products as competitor funds in the APRA-regulated sectors look at introducing annuities and other options that can help members better manage cash flow in retirement, according to Apricot Actuaries.
The group’s chief executive, Jim Hennington, told SMSF Adviser that SMSF professionals would face increasing competition from APRA-regulated funds when it came to retaining members post-retirement as the new products came to market.
“In the near future, it might not be as simple for professionals to recommend an account-based pension from an SMSF when their client retires,” Mr Hennington said.
“This is because, under government proposals, APRA funds look likely to introduce a range of new retirement product types that better meet other common objectives of retirees — in particular, income that lasts for life and can keep pace with the cost of living.”
Mr Hennington added that new types of post-retirement product were likely to be able to provide members in retirement with more certainty about how long their super savings were going to last, meaning these types of products could be more in keeping with the adviser’s duty to act in the client’s best interest.
“We’re likely to see APRA funds introduce products such as investment-linked annuities that offer investment choice but also insurance that income will continue for life,” he said.
“Compared to these products, an account-based pension may only provide the best outcome if you know you’re going to die before life expectancy.”
Mr Hennington said knowledge of the types of post-retirement products available would be “of paramount importance” for SMSF professionals hoping to keep pace with their clients’ changing retirement needs.