Speaking at a recent Fidelity International event, Fidelity head of retirement solutions Richard Dinham said while there has been a lot of industry discussion about improving retirement solutions over the past 20 years, there has been limited action in this area.
Only since the retirement covenant came in last year, have superannuation funds had to put a plan together for their members in retirement, said Mr Dinham speaking at the launch of Fidelity’s research report New Life Old Life.
“In the next two to three years, the government will require funds to implement those plans which can only be a good thing in terms of outcomes for retirees,” he said.
Mr Dinham said there are hopes this will improve the status quo of 19 out of 20 individuals not receiving any advice and the limited information on what these individuals are doing in terms of structuring their investments.
“The Retirement Income Review a few years ago found that more than 50 per cent of retirees at the point of death were leaving 90 per cent of their balances behind. So, there is a massive underspend through lack of confidence.”
“They’re petrified of running out of money but actually they’re probably in a better position than they realize [sic] but they just don’t have any guidance or help. There covenants should drastically help. It won’t be the panacea but it is certainly a step in the right direction.”
Mr Dinham also noted that the Quality of Advice Review is aiming to reduce the barriers and litigation risk of super funds providing some form of simple advice to members, based on the proposals paper released last year.
“While the cost of comprehensive advice is very, often just being pointed in the right direction can make a big difference. The QAR will hopefully reduce the barriers to that,” he said.
While the QAR report is still currently being reviewed by the government, Mr Dinham said the recommendations in the proposals paper were to reduce the burden on super funds in terms of their legal liability with providing advice.
Assuming the government does proceed with those recommendations and legislates them, Mr Dinham expects superannuation funds will start moving more into the advice space within the next couple of years.
Speaking at the same event, MYMAVINS consulting partner Jason Andriessen said that the solution to the current advice gap for retirement planning is inevitably going to come from the super funds.
“Super funds are armed and ready. The missing link is the regulatory environment,” said Mr Andriessen.
“There are super funds that know their members intimately and they’re ready to reach out to them with sensible advice that doesn’t take a third of the day to deliver.”
Mr Andriessen said the advice offerings from the super funds will be a mix of digital advice and advice provided by an adviser.
“There will be digital capabilities and every fund will have those capabilities and there will be escalation points to advisers external to the super fund.”
