Big super controlling retirements

The Australian Government is increasingly concerned that more and more Australians are dying with more superannuation than they entered retirement with, meaning they are not spending enough through retirement.

This has prompted the Government to spend a lot of time trying to generate income products, that is where you put so much money up front and you are guaranteed a certain amount each month for life indexed for inflation.

Perfect. Except, the problem is we never know how long each person is going to live, which makes the calculations behind these products extremely complex and difficult to work out and the resulting products, I think, are always relatively expensive reflecting the work that goes into them.

Nonetheless, the Government is putting enormous pressure on the big industry super funds to put in place ‘retirement income products that they can automatically offer clients when they reach retirement age.

There’s also a suggestion that in order to get past the problem that there are no longer enough financial planners to go around, they will authorize general staff members without appropriate qualifications to provide ‘limited’ advice.

It does make me think that one of the big problems the Royal Commission discovered in the financial planning industry, that large financial institutions were not just creating the products they sold, they were employing the workforce to flog them.

Anyway, moving on….

I think there is a big issue with superannuation funds creating new income products for people moving into retirement. The fear is that they will dress these products up as being guaranteed for life and indexed for inflation. They will sound fantastic.

But lots of people will sign up for them without drilling down and seeing just how expensive these types of products are and the only person that comes out ahead is the superannuation company promoting them.

So, the Government is still just toying with these ideas, but I am just putting it out there ahead of time that the more a product is guaranteed for your life and the more it is indexed for inflation, the more expensive it must be to acquire.

Before you sign up for any product like this make sure that you drill down and understand how it works and just how much is being paid in the way of fees and charges.