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Advice reforms can solve retirement income challenges

Opening up superannuation funds to more comprehensive financial advice could help solve some of the retirement income challenges Australians face, according to the Actuaries Institute.

In its submission to the Retirement Phase of Superannuation consultation, the institute wrote that the Delivering Better Financial Outcomes package of reforms could prove invaluable to retirees and pre-retirees as they navigate a labyrinthine system.

One of the proposed changes from the Delivering Better Financial Outcomes reforms is expanding superannuation advice.

This can include super funds to consider a broader range of a member's personal and household circumstances such as debt, spouse's income, or age pension eligibility.

If enacted, the Actuaries Institute suggests requiring super funds to show retirement income estimates alongside account balance information on member benefit statements, including members in receipt of account-based pensions.

Another suggestion is the government providing educational material to members to better understand how large unforeseen expenses such as aged care and medical expenses affect their nest egg.

Such new laws can lead to super funds assisting or nudging members to "better settings as they approach enter and then live through their retirement phase." This means communicating basic information before they reach retirement and to check-in with them throughout their retirement years.

The institute also said that super funds should be able to nudge members approaching or already in retirement to products that can help with their retirement income needs without falling fowl of anti-hawking laws.

Tim Jenkins, the chair of the institute's superannuation and investments practice committee, said beyond the welcome fixes to financial advice for those Australians, "we should be thinking about a holistic help, guidance and advice framework to remove the caution that many people feel when drawing down on their superannuation."

A critical part of the solution is making sure superannuation has pathways that help nudge people towards well-rounded default solutions for funding retirement, he said, warning that notions of "a standardised product" need to be approached with care.

"No single solution, that covers a mix of regular income and savings to draw down, and which lasts a lifetime, suits everyone. A broad frame is required to consider super alongside any sources of government support, income from part-time work and home equity to fund a dignified retirement," he said.

Read more: Actuaries InstituteDelivering Better Financial OutcomesTim Jenkins