FPA advocates for reduced pension minimums

The Financial Planning Association of Australia is keeping itself busy amid COVID-19 uncertainty, with chief executive Dante De Gori urging the government  to consider moves to ease the pressure on retirees, just weeks after he had an audience with the retirement income review panel.

De Gori's letter calls on the government to mirror the decision of the Rudd Labor government as it dealt with the fallout of the Global Financial Crisis in 2008 to reduce the minimum annual payment amount for superannuation income streams.

De Gori pointed out the government's decision ensured Australians in retirement could choose to preserve more of their super funds instead of taking account-based pensions and annuities.

"This choice allowed retirees an opportunity to offset some of the losses they had incurred through the market falls and strengthen their financial security for the remainder of their retirement," De Gori wrote.

The FPA chief said the association believes a similar approach would benefit the nation if taken as part of the government's response to the crisis.

"Electing to take less income may not be possible for some retirees, however it could make a significant difference for others," De Gori pointed out.

"It is important that Australians continue to be given the opportunity to secure their own financial future and reduce their burden on public funds.

"Our members are continuing to work with their retired clients to navigate the current market volatility and the uncertainty caused by the pandemic. Reduced minimum payment rates would provided an additional strategy to manage these challenges."

The letter is the latest in a string of advocacy work the association has completed, including a supplementary submission to the retirement income review, which reiterated the value of financial advice and revealed De Gori recently sat down with the retirement income review to air the concerns of FPA members in-person. FPA head of policy and professional standards Ben Marshan - who authored the submission - also attended.

According to Marshan, the meeting covered the role of advice in helping consumers to understand the three pillars of the retirement income system.

The submission recommends the review consider several research reports on consumer's views about advice, including ASIC Report 627, CoreData analysis produced for MLC Wealth, and reports by global investment managers Vanguard and Fidelity International.

The association made several recommendations on the cost of financial advice, starting with establishing the scale of the challenge facing Australians in affording personal financial advice, "particularly due to escalating regulatory costs".

"Without this evidence base, decisions about future reforms will not be informed by a clear picture of the consumer and their interests," the FPA said.

The association also recommended ASIC monitor the increasing costs to practice as a planner, such as through government fees and charges, cost-recovery levies and increases to professional indemnity insurance premiums, and the impact they have on the affordability of advice.

Read our full COVID-19 news coverage and analysis here.

Read more: FPAASICDante De GoriFinancial Planning Association of AustraliaBen MarshanFidelity InternationalGlobal Financial CrisisMLC WealthRudd LaborVanguard
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