There is currently a myriad of choice and complexity in the accumulation phase of superannuation and not enough choice and diversity in products in the retirement phase, according to superannuation experts Mercer.
There are currently 116 MySuper products available to Australians, in stark contrast there are only three providers of retirement income products, other than account based pensions.
Mercer’s Managing Director and Pacific Market Leader, Mr Ben Walsh, will address the issue of ‘Building true choice and diversity within superannuation’ on a panel discussion tomorrow at a Banking and Wealth Summit in Sydney.
“Choice is only valuable when it’s exercised and we know Australians are an unengaged bunch when it comes to super. So a combination of default funds and choice of fund is important, but the complexity of super can be overwhelming and ultimately act as a barrier to choice being exercised,” Mr Walsh said.
“In stark contrast to the abundance of choice in the accumulation phase of super, Australians are starved of choice and diversity when it comes to options to secure an adequate and sustainable retirement income that will last as long as they do,” he said.
“We know Australians will outlive their super savings by five years on average and one in four will outlive their super savings by more than 10 years. We need more options with longevity risk protection, which means more products that can provide an income for life. Account based pensions, which dominate the post retirement market, and fixed annuities cannot do this.
“Developing a more diverse retirement income market in terms of products, providers and distribution channels has never been more important.
“Fundamentally, three major shifts in the industry need to occur to improve the value of choice for Australians: 1. We need more industry consolidation; 2. We need more retirement income options that provide an income for life and broader distribution of these products; and 3. The industry needs to simplify super and better help our customers to make decisions that will improve their retirement outcomes,” said Mr Walsh.
“How retirement income products are accessed by customers is just as important as providing choice and diversity of products. Product design is important, but it is too inward looking for the industry – we should be talking about distribution and access to more retirement income options for Australians.
“The point of choice at retirement, when someone transitions from accumulating super to deciding how to manage their lump sum to provide a sustainable and adequate income, without knowing how long it has to last, usually happens through a financial adviser.
“We have to ask the question of how we improve access to a diverse range of retirement income products and we have to look at the role and availability of holistic broad-based advice at that moment of truth for our industry,” Mr Walsh said.
Ben will be joined on the panel at the summit by Prof Graeme Samuel AC, former ACCC Chair, Warren Chant, Chant West, and Scott Hartley, CEO, SunSuper.
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in more than 40 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com.au Follow Mercer on Twitter @MercerAu