Super Members Council calls for less complex, more simple system

New research contained in the Super Members Council’s (SMC’s) submission to Treasury’s consultation on superannuation in retirement has suggested there is still work to be done in simplifying Australia’s “overly complex” superannuation system.

Using data from the Australian Bureau of Statistics (ABS), deidentified information from super funds and consumer surveys conducted by Sue Bell, SMC’s submission showed that approximately one third of Australian retirees accessed their super at 63 years of age and 25 per cent are still working in their early 70s, despite their intention to retire at 67 years of age.

The SMC also found that the median balance at retirement was $200,000, while the median working 30-year-old is now expected to retire with $500,000; 66 per cent of retirees consume their retirement savings more than the minimum; and 90 per cent of women and 80 per cent of men have no remaining super by the time they reach life-expectancy age.

“Retirement is changing – and super in retirement needs to change with it,” Misha Schubert, SMC chief executive, said said.

“There’s a huge appetite for high-quality, low-cost and no-cost advice to help people plan wisely for retirement.”

“We want to ensure retirement is simple, easy and flexible. People should be able to have confidence that they are in a good product that’s right for them.”

“After a lifetime of building savings, people should be free to spend their money how they choose in retirement.”

“We are on the cusp of a seismic change to retirement, and we will contribute thoughtfully to this important ongoing discussion, which must be based on a sound evidence base. Our submission busts the longstanding myth that retirees are not spending their super.”

Schubert said while living with superannuation and the Age Pension combined has provided millions of Australians with a better life in retirement, the complexities and uncertainties surrounding Australia’s super system remain. Research showed less than half of polled super members were confident in their understanding of account-based pensions and annuities, with 73 per cent stating they would trust personalised and tailored advice from super funds.

The SMC’s submission made several recommendations to the Government, including:

• Swiftly consult and legislate the retirement and super component of the financial advice reform package before the end of this year;
• Make it easier for members to switch into retirement products – and end the current ban on being able to add contributions to a retirement phase super account;
• With member permission, the government should notify super funds about their members eligibility for pensions and other government supports, so members can be given tailored information on how to maximise their retirement income;
• A comprehensive retirement test should be developed that measures a broad set of factors including investment performance, flexibility to access funds in retirement, and giving people control over the level of risk they want; and
• The government should not mandate the use of annuities for members or cohorts of members. Trustees are best placed to create investment strategies for their members.