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13 Apr 2016

Matter of Interest | Self-Managed Superannuation Fund Retirement Course

The Hon. A.L. McLACHLAN ( 15:23 :47 ): Members of the Legislative Council may be aware that before I was elected to serve in this place I was director of the University of Adelaide’s International Centre for Financial Services (ICFS). I wish to educate and inform the members about a worthy initiative of the ICFS.

The ICFS has recently launched a great new initiative between the centre and the financial services firm, Accurium. Together, they have developed a short course to assist financial services advisers in providing advice to their clients to ensure that they have sufficient funds to last for the term of their retirement. Accurium is an actuarial firm which specialises in self-managed superannuation and assisting Australians with their retirement planning.

On 16 March, I was honoured to be invited to the launch of the new course by the director of the ICFS and the CEO of Accurium at the National Wine Centre. The course is titled ‘Self-managed superannuation fund retirement: SMSF essentials’. The course will not only be offered in Adelaide but also taught on the east coast, in Brisbane, Melbourne and Sydney. It is a great example of entrepreneurialism by the ICFS and the university.

The ICFS is continuing to grow into an important research and teaching institution in the financial services community. It has entered into a joint venture with Accurium, a leading provider of actuarial services in the country. The ICFS has a longstanding interest in self-managed superannuation funds and retirement planning. The Australian Taxation Office informs us that self-managed superannuation funds comprise up to ’29 per cent of the $2 trillion total superannuation assets…with more than one million SMSF members’.

Self-managed superannuation funds are an important and growing area within the superannuation sector. Self-managed superannuation funds provide an alternative to the traditional superannuation funds. Advocates argue that they are one of the best vehicles for superannuation savings because of their ability to readily adapt and respond to market conditions.

The course is important because of the ever-increasing life expectancy of retirees and the need to make individual savings last longer to ensure an adequate lifestyle. In other words, as the population ages financial advisers are under increasing pressure to develop strategies to convert their clients’ superannuation savings into sustainable cash flows for retirement. With the current pension age now reaching 65, and life expectancy being 80 years for men and 84 years for women, the average superannuation balance is facing a serious longevity risk.

The Association of Superannuation Funds of Australia (ASFA) and the State Street Global Advisers (SSGA) publication, entitled ‘The future of retirement income’, calculated that for a couple to retire in a modest lifestyle they would need an income of $33,766 per annum. Further, for a couple to retire comfortably, they would need an annual income of $42,604. However, ASFA and SSGA also reported that on average 13 million Australians had a superannuation balance of less than $300,000 in total.

This has resulted in one-quarter of Australians who retired at 55 having no superannuation income by the time they reached 70 years of age. The 2015 ‘Intergenerational report: Australia in 2055’ projected that of those of retirement age in 2054-55, 67 per cent will still be relying on the age pension. The Financial System Inquiry Final Report argued that ‘superannuation assets are not being efficiently converted into retirement incomes due to a lack of risk pooling and over-reliance on individual account-based pensions’.

The challenge to ensure that individual superannuation will last the distance has inspired the university and Accurium to pass on its expertise in developing strategies to assist financial advisers to provide cogent advice to superannuants. With the ageing of our population in Australia, particularly in South Australia, tailoring financial services towards those post retirement and the elderly is becoming increasingly critical.

A report published by Deloittes Actuaries and Consultants, titled ‘Dynamics of the superannuation system: the next 20 years—2013-2033’, states that the ageing population will only increase. The report suggests that ‘the number of Australians over the age of 65 will increase by 75 per cent over the next 20 years…and at a much faster rate than the working population’. In the immediate future, the financial services sector will increasingly advise clients in the post-retirement phase, rather than in the superannuation accumulation phase.

The course has been devised, developed and launched at exactly the right time to meet the needs of the advising market. Financial issues that arise among the ageing population are superannuation longevity risk and aged-care and health costs. Receiving financial advice post retirement could be one way of finding a solution to retirees depleting their superannuation and becoming reliant on the age pension. I wish the director, Mr David White, and the assistant director, Tania Turner, of the ICFS all the best with this new endeavour and every success going forward. I congratulate the CEO of Accurium, Ms Tracy Williams, for her wisdom in selecting the Adelaide University as their partner.

Members interjecting:

The PRESIDENT: Don’t let it worry you.

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