Government’s probe into retirement products to kick off ‘very’ soon

ifa earlier reported that Treasury is set to release a consultation paper with the aim of strengthening the accessibility of retirement products by canvassing, among other things, problems with financial advice.

Speaking on the matter on Friday, at an event attended by ifa and organised by the Financial Advice Association Australia (FAAA) and the Financial Services Council (FSC), Financial Services Minister Stephen Jones said that while “it’s a good time for innovation in retirement”, advice will be key in helping Australians understand what’s available in the market and how to use it.

“I think the opportunity is there for innovation and service provision in that area. I don’t think it’s going to happen with the supply side alone, I don’t think it’s going to happen just because product manufacturers come up with great new products, because Australians don’t have a history or a familiarity with annuities for example, or those other longevity risk style products, so I think there will need to be a bunch of information and advice,” the minister said.

According to him, advised retirement solutions are likely to trump those that “people buy off the shelf”.

“I, for one, and the Treasurer are pushing for a public conversation. There will be a consultation paper out on that very, very, very soon,” Mr Jones said.

In August, in unveiling its intergenerational report, the government expressed concern over a noticeable reluctance among Australians to tap into their retirement savings.

At the time, Treasurer Jim Chalmers said: “Half of retirees draw down the minimum and, on average, people who draw down the minimum will still have about a quarter of their super remaining when they pass on.”

“What that really means is people are living more frugally than they need to. There’s not enough confidence in their balances, there’s not enough diversity or flexibility in products in the market or literacy or advice or strategies to match people with these products.”

Addressing the matter on Friday, Mr Jones said living frugally becomes a big issue when people are unable to access key services in retirement.

“There will always be a proportion of unused money in somebody’s retirement income account, but if it’s one in three dollars, and somebody’s been living in frugality and then not been able to access aged care services etc, then we have to say, ‘Our retirement income system isn’t working properly’,” he said.

“We don’t have a use-by-date in our head, most of us anyway, so we will naturally want to put a bit of money aside in our retirement for the uncertainty, but I think Australians can be living a lot better than they actually are in retirement if they have access to the right information and advice.”

Members of the advice community have previously said they are very keen to understand the government’s approach to the upcoming consultation.

Eugene Ardino, chief executive officer at Lifespan Financial Planning, told ifa in August that he is hopeful the consultation paper will provide clarity around where the government is coming from with respect to retirement products and their accessibility.

“While obtaining advice is obviously more effective for consumers if they access it long before retirement, having an adviser to navigate trying to decide which retirement products best suit an individual’s unique circumstances, will also play a large part in the effectiveness of any new framework that is built.

“Therefore, it is important, in my view, that personal advice is made available to consumers who seek to purchase any new retirement products so they can assess the appropriateness of them.”

Mr Ardino stressed, however, that “it is imperative that this advice be accessed from an adviser” and one that is “not related to the product provider”.