The Finology Summit, which is run under the umbrella of the Portfolio Construction Forum, is now in its seventh year and at this year’s meeting in Sydney, there were calls by leading investment advisers to stop the increasing “underspending” of superannuation.
Earlier this year, the government also called for Australian retirees to spend their superannuation savings but volatile and uncertain economic forecasts have seen older Australians hanging on to their money.
As reported in The Australian newspaper, one of the speakers at the summit, Allianz Retire+ head of product Mark Lapedus, said the retirees no longer have the confidence that their superannuation will sustain “a level of income” for a long period of time.
“A lot of research has been done to look at how much retirees are actually taking and the (Federal Treasury department) retirement income review talks about the fact that people are underspending,” he said.
Currently, under the Superannuation Industry Supervision Act, retirees under 65 must draw at least 4 per cent of their account balance each year, while those aged between 65 to 74 years must take 5 per cent. From the age of 95, retirees have to withdraw 14 per cent of their income.
A Treasury survey found that most retirees draw only the minimum amount.
“The SIS minimum is exactly there as a minimum, but a lot of retirees actually believe that because that’s the amount that the regulators tell them to take, that’s obviously the right amount and therefore you shouldn’t take any more than that,” Mr Lapedus said.
Another speaker, Fidelity head of client solutions and retirement Richard Dinham, said the government minimums anchor people’s spending patterns.
“The government really needs to think about what those minimums should be, and the 4 per cent is probably too low,” he said.
“The statistics and the system back up the fact that they (retirees) are underspending and leaving too much at the point of death.
“It could be that future governments remove some of the tax benefits if there is too much being passed on to the next generation which is an unintended purpose of super.”
So right now the government want me to keep working. I have only two reasons to continue working (1) to better cover the actuarial risk of a long life and (2) intertwined with 1, to be able to leave my kids something. Additionally we are right now raising rates to curb spending in the economy. And in this moment of all moments these clowns think the message is regulate retirees to lower their savings and/or tax their savings more. Leave your agendas alone this is our life savings not a thing for clowns at the fringes of economics to play with!!!!
What non-sense. Forcing people to take more from super doesn’t equate to higher spending. ALL my clients who take more than desired just accumulate non-super wealth. You CANNOT and WILL NOT change decision making habits of people who are 60-90 years old.
One of the most bizarre recommendations I have seen. Ever.
Retirees don’t spend because of lots of reasons. They value more than new shiny toys. They have generally grown up through more hard times than those under 50 would have seen. They don’t know how long they will live for. They are keeping money for those just in case moments.
Well might retires wish to preserve Wealth in the face of government policy driving up energy costs and inflation. No talk about curbing insane government spending. Let’s just get retirees to blow theirs as well. This is just a softening up to find another excuse to force money out of concessionally taxed super to where it can be more readily taxed at higher rates by government.
The people writing here should know better.
So they are afraid that retirees are passing to much money on their death.
The retirees money either sits in their superfund, or it sits in their personal account, either way it goes to the estate on their death.
Retirees will only spend as much money as they need to meet their living expenses, whatever they may be at the time.
Legislating to take more money out of super will not achieve the desired outcome, nor should legislation be put in place to encourage people to spend their super. Generally these people are not getting the age pension becasue of their saving patterns, so encouraging them to spend more with the added anxiety that possibly running out of money brings them, will not go over well, and only place further burden on the age pension, as future generations watch and shy away from saving in super above their super guaratee requirments.
So if legislated to increase withdrawal, the retirees will take more out of their pension and then just sit it in their bank account, and when they die it won’t be taxed when distributed to their non-dependent family members? Of course a lot of the older generation have a fixation on getting the age pension too, where its viewed as their entitlement. Maybe the government could look at the assets tests thresholds for age pension and and some kind of policy about including their home under the assets test too.
As an adviser to retirees I can comfortably say the opinions in this article are garbage!
Clearly expressed by people who don’t understand retirees.
It’s not an obligation of a retiree to blow their accumulated wealth to stimulate the economy and then end up on the pension. In fact they take their custodial responsibility in society far greater than the people who simply want to encourage them to spend like a drunken sailor.
I will bet the opinions are expressed by people with an average age under 53. Never experienced seriously rising interest rates or high inflation in their working lives.
Take your 3 decades of recency bias away and then see how you feel.
Retirees are scarred by the seriously bad financial management the current swathe of 6 million voters under the age 53 who only learn through direct experience vote for. More debt and deficits.
Retirees know the country will go broke on current metrics so they are the smart ones provisioning for their future when the country cannot afford an aged pension.
The self interested “professional opinion” is sickening