Advice inaccessibility proves taxing on unwitting retirees

According to the Super Members Council (SMC), the inaccessibility of financial advice has resulted in a large number of Australians continuing to hold retirement savings in an accumulation account, despite being over 65 and no longer working full time.

As a result, account holders could be paying an average of $4,500 in taxes over their retirement per $100,000 in their account, while they could instead benefit from the tax-free retirement stage.

However, inactive accounts could be, in part, responsible for this, with the SMC explaining that some people don’t act to change their accounts due to being disengaged or simply not knowing what they should do.

Furthermore, a consumer survey by the SMC found that 58 per cent of retirees who have an inactive account with less than $100,000 in it continue to leave their super in the accumulation phase because they either haven’t decided what they want to do with their super or they don’t know what to do with it or how.

“This is the group that would most benefit from super funds being able to offer simple and affordable advice relating to their retirement income, as a detailed financial plan may be too costly,” the SMC said.

With cost and accessibility identified as the biggest hurdles for Australians, SMC chief executive Misha Schubert said tranche two of the Delivering Better Financial Outcomes (DBFO) reforms is essential to allowing more people to access basic financial advice.

“Not knowing enough about super can lead to poor decisions, like leaving accounts inactive or withdrawing funds without proper planning,” Schubert said.

“Making simple information and advice available to more Australians is a big missing piece of the retirement puzzle. The coming financial advice reforms will help make advice more affordable.

“The package of reforms will enable the 2.5 million Australians on the runway to retirement to get the high-quality information they need to plan wisely at a much lower cost – and we urge government to introduce legislation swiftly.”

Even so, Schubert has also advised caution in the past in regard to the implementation of the new class of advisers, stating the need for “robust consumer protections”, particularly in relation to the proposed one-off fee charging methodology.

“Most super fund members just want simple information to be able to calculate their total retirement income for them and their family. This package of reforms will enable that urgent need to be met,” Schubert said at the time.

“We’ll examine the legislation closely to ensure strong protections for consumers.”