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Cost of retirement at a record high
The cost of living for retirees is rising at a faster rate than general inflation, with an annual increase in the yearly expenditure needed to reach ASFA’s comfortable retirement standard of 7.7% in the March quarter – compared to a 7% increase in the overall CPI.
Couples now need a record $70,482 a year to afford a comfortable retirement, while singles need $50,004.
“Retiree budgets have been under substantial pressure for over 18 months due to the higher cost of essential goods and services, namely food, fuel and electricity, with the latter up 15% over the year,” Association of Superannuation Funds of Australia (ASFA) chief executive officer Dr Martin Fahy said.
Fahy also pointed out that self-funded retirees will not be eligible for Federal Budget measures aimed at relieving cost-of-living pressures.
During the March quarter, medical and hospital services costs rose 4.2% over the quarter, the price of pharmaceutical products rose by 4.5% and insurance costs were up a further 3.5%.
Fortunately, some retirees may benefit from higher interest rates on income from their term deposits and savings.
“We are seeing a turnaround in term deposit income and, critically, the 1 July increase in the Super Guarantee (SG) rate to 11% will put a greater number of Australians on track to achieve the dignified retirements they deserve,” Fahy said.
Spaceship flies too close to the sun
Spaceship Super has had an interim stop order placed on it by the Australian Securities and Investments Commission (ASIC) due to deficiencies in its target market determination (TMD).
ASIC considered the target market outlined in the TMD for the Spaceship Super product was defined too broadly and had not properly taken into account the risks of the product options.
The order is the first interim stop order on a superannuation product under the design and distribution obligations (DDO). For the duration of the stop order Spaceship Super will be unable to take new members.
ASIC has also made interim stop orders on three managed funds promoted by Spaceship Capital – Spaceship Earth Portfolio, Spaceship Origin Portfolio and Spaceship Universe Portfolio.
“ASIC made the interim orders to protect consumers and retail investors from acquiring products that may not be suitable for their financial objectives, situation or needs,” the regulator said in a statement.
In its own statement, Spaceship said it was taking immediate steps to address ASIC’s concerns and was committed to working proactively to address the issue.
Check your super
The Australian Taxation Office (ATO) is encouraging everyone to make sure their superannuation details are in order before the end of this financial year.
They have put together a 5-step checklist that includes consolidating multiple accounts and making sure appropriate beneficiaries have been nominated.
The ATO points out that what may seem like small decisions today can have big impacts on your future retirement outcomes.
“For instance, missing out on some employer contributions today, could have a huge impact on your super balance in retirement due to the compounding effect of earnings. The same can happen if you have lost or unclaimed super,” the ATO says.
Roadmap for financial advice reforms
It’s been a long wait, but the Federal Government has finally announced it will implement 14 of the 22 recommendations made by its Quality of Advice review.
Minister for Financial Services, Stephen Jones said in a statement the success of super means Australians are retiring with more wealth than ever before, with the average Australian having a balance of around $200,000 in retirement.
“There are five million Australians approaching retirement that need assistance navigating the pension and superannuation systems.
“These reforms aim to address the high cost of advice, better protect consumers, bolster ethical standards and ensure Australians can access helpful information that could make a meaningful difference to their quality of life in retirement.”
The reforms will be progressed in three streams. In a move welcomed by the industry, stream one focuses on removing red tape that adds to the cost of advice with no benefit to consumers.
“In particular, replacing Statements of Advice (SOAs) with a record of advice that is more fit-for-purpose and streamlining the ongoing fee renewal and consent requirements into a single form will simplify the disclosure requirements and help to ensure consumers are presented with clear and concise information without unnecessary complexity,” said SMSF Association CEO Peter Burgess.
Stream two will expand access to retirement income advice by allowing super funds to expand the provision of personal advice to their members.
Legislation governing the changes is expected in the second half of 2023 or early 2024.
Superannuation assets continue to rise
Superannuation assets now total $3.5 trillion, rising by 1.1% over the year to the end of March 2023, according to the Australian Prudential Regulation Authority (APRA).
Contribution flows were strong on the back of strong employment and an increase in the Superannuation Guarantee. Assets were also helped by a rebound in financial markets over the December 2022 and March 2023 quarters.
Contributions increased by a solid 11.3% to $159 billion over the year. Employer contributions increased by 12.6% to $118.6 billion, while member contributions increased by 7.5% to $40.4 billion.
Approximately $95.8 billion was paid out from super (up 13.8% over the year). Most of the payouts were in lump sums – $53.5 billion, up 20.8%. APRA said the increases were in-line with longer term trends due to a maturing superannuation system and ageing population.
AustralianSuper reduces insurance costs
AustralianSuper has been able to reduce insurance costs for most of its members by an average of 11.8%, following its latest review of insurance.
“For many members, insurance through AustralianSuper is better value than buying directly from an insurer,” says Rose Kerlin, AustralianSuper’s chief member officer.
“It’s also easier for people to pay for insurance through their super rather than their take-home pay.”
AustralianSuper said it was meeting its aim of keeping default insurance costs to less than 1% of members’ average salary over their lifetime to retirement.
AustralianSuper works with insurer TAL to provide insurance for members. The claims acceptance rate for insurance through AustralianSuper was 97% for the 2022 financial year with over $427 million paid to members and their families.
Over the past 10 years to December 2022, the fund paid over $4 billion across 62,600 insurance claims to members and their families.
Australian ETP markets to hit $200 billion
The Australian exchange traded product (ETP) industry is forecast to reach 350 products and $200 billion in funds under management by 2025, according to Global X ETFs Australia.
Global X head of distribution Kanish Chugh said they expect ETP inflows to increase this year as investors rationalise their investments and take advantage of the broad range of exchange traded funds (ETFs) listed on the ASX.
“There are still gaps in the market for providers to list innovative investment solutions and ETFs are the most convenient and cost-effective vehicles for Australian investors to build their portfolios,” Chugh said.
The ETP market rose by 7.1% to $136.2 billion over the 12 months to 24 March 2023, with 301 products listed. Even with the volatility of markets last year, 42 new ETPs were launched.
“There were also a significant number of environmentally conscious and sustainability focused ETFs launched, highlighting the shift in the ETF market to values-based investing,” Chugh said.
AMP sells SMSF admin business SuperConcepts
AMP has announced that it will sell its self-managed superannuation fund (SMSF) administration and software business SuperConcepts to a private management group and Pemba Capital Partners.
Upon completion, expected next quarter, approximately 500 employees will transfer out of AMP with the sale.
The management group buying SuperConcepts with Pemba consists of managing director Matthew Rowe and sees the return of Brad Ackermann as chief operating officer and Andrew Row as executive director of client services.
“We acknowledge AMP for supporting this natural transition for the SuperConcepts business, its clients, team and partners,” Rowe said.
“Our team will invest in the business and deliver technology-led solutions, great customer outcomes and seek to simplify SMSFs to enable more Australians to control their super in Australia’s growing SMSF market.”