Australia needs retirement income diversity
Choosing the right retirement income product can be the difference between having an enjoyable retirement and having to live conservatively in your later years.
2015’s far-reaching Financial Systems Inquiry from former Commonwealth Bank CEO David Murray argues, “Choosing retirement income products necessarily involves trade-offs between income, flexibility and risk management,” but suggests that, “barriers are stifling innovation and adding costs to providers developing new products.”
This is suggestion that’s being backed up by financial institution Mercer.
In an interview with Investor Daily, Mercer managing director and Pacific market leader Ben Walsh said, ““Developing a more diverse retirement income market in terms of products, providers and distribution channels has never been more important.”
“In stark contrast to the abundance of choice in the accumulation phase of super, Australians are starved of choice and diversity when it comes to options to secure an adequate and sustainable retirement income that will last as long as they do.”
Mr Walsh argues that there’s a need to move beyond the traditional account-based pension and fixed-annuity products to meet the needs of the future.
“We need more options with longevity risk protection, which means more products that can provide an income for life,” Mr Walsh adds, “How retirement income products are accessed by customers is just as important providing choice and diversity of products. Product design is important, but it is too inward looking for the industry – we should be talking about distribution and access to more retirement income options for Australians.”
As part of the Financial Systems Inquiry, “One policy option proposed in submissions is to streamline administrative arrangements for assessing the eligibility of products for tax concessions and Age Pension means-test treatment. This may reduce the regulatory costs of product development.”
An example of one retirement income product that offers both flexibility and reliable returns is Equip’s My Pension. This innovative product utilises a ‘3-bucket-strategy’ that splits you assets between a super to cash balance you can access, cautious investments and a final third dedicated to more growth-oriented investments, putting you in a good position to take advantage of any market movement while hedging you against market drops.
Equip manages $7 billion of investments for members working across a wide range of Australian industry sectors. This superannuation fund has been providing strong investment performance and has been a reliable provider of retirement benefits for over 80 years.
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