Retirement ecosystem needs a rethink: experts

Authors Andrew Gale, a former chairman of the SMSF Association and Stephen Huppert, an independent superannuation adviser, are calling on the government to set up a regulatory framework to make it easier for superannuation funds to provide this kind of support.

They explained that such a framework would not only incorporate the recommendations from the recent Quality of Advice Review but also align seamlessly with the findings of the Retirement Income Review.

Additionally, they highlighted that adopting such a framework would assist superannuation trustees in meeting their obligations under the Retirement Income Covenant and navigating the complexities of financial advice regulations.

Speaking to SMSF Adviser, Mr Gale said: “The big challenge we have is how to best fund incomes in retirement in the future.”

“It’s time we gave 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.”

He said that since life expectancy has increased in the 30 years since the three-pillar framework was established, people now face the prospect that they have up to three decades of retirement if they stop working at 65.

“That introduces some uncertainties, the most common of which is that they may run out of money, so many people live more frugally than they need to,” he said.

“There should be an opportunity for them to tap into additional sources of income like part-time work or home equity, to address that standard of living.”

Additionally, Mr Gale said people are often seeking more guidance about retirement planning, rather than just comprehensive financial advice, which can be both hard to obtain and expensive.

“A Help Guidance and Advice framework would make it easier for people to obtain the support they need,” he said.

“This remains a real need even after the QAR report and the government’s response to the report.”

Mr Huppert said retirement has evolved significantly, and that as a result 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,” he said.

“While financial considerations typically take centre stage when planning for retirement, it’s the non-financial considerations that dictate whether one has a good retirement.”

Mr Huppert said Australians would like to see a more holistic approach to retirement planning, considering individual circumstances and offering more flexibility.

“A lot of coverage for retirement is focused on financial planning but we would like to see the government and advisers take a more multi-dimensional approach and offer a higher degree of retirement literacy,” he said.

“There is an opportunity for super funds to expand their base to deal with a richer set of discussions around not just planning for their financial well-being but also retirees’ physical and mental health needs and how they will maintain their sense of identity and purpose in life after full-time work.”

The paper also calls for a national longevity strategy that could help redefine retirement by celebrating older Australians and their contributions to society, as well as open pathways for them to access new income streams such as part-time work.

Mr Gale said extended work patterns would have immense benefits for society and the national economy.

“Businesses would also benefit from having workers with experience, insights, and wisdom,” he said.

Mr Huppert added that it is time to “light the fuse on a much richer discussion” about what retirement looks like.

“We need to look at what life looks like after full-time work and shift the focus to think about longevity, work options, community involvement, and a sense of meaning and purpose,” he said.