Intergenerational Report confirms the need for financial advice for all Australians
With the release of the Intergenerational Report (IGR), The Financial Planning Association of Australia (FPA) is once again calling for Australians to seek quality financial advice, particularly in light of our ageing population and the fact that, as a nation, our life expectancy is among the longest in the world.
The IGR projects life expectancy at birth to be 95.1 years for men and 96.6 years for women by 2054/55, compared with 91.5 and 93.6 years today. Those living to over 100 will increase to a staggering 40,000 compared to 122 in 1974/75.
By 2055 there will be only 2.7 working Australians to support every Australian over 65, compared with 4.5 today and 7.3 in 1974/75.
CEO of the FPA, Mark Rantall, explains that while the report does not anticipate a decline in the proportion of retirees receiving the Age Pension, it does project an increase in the proportion of part-rate relative to full-rate pensioners.
“The IGR makes it very clear that there is a link between superannuation savings and reliance on the Age Pension. Fewer people relying on the Age Pension will clearly help reduce the overall financial burden on the nation. That’s where getting the right financial advice comes in. If Australians seek proper financial advice from an early age and use it to maximise their superannuation so they can reduce reliance on the Age Pension, the nation as a whole will be infinitely better off,” he said.
“It’s clear that benefits also flow to individual Australians. Those who do receive financial advice are more likely to only rely on a part-pension rather than a full pension. They are more financially secure, have a greater level of standard of living and are able to better manage any longevity risk. And the role financial planners play is pivotal. They have the knowledge to assist consumers in accumulating a larger and more adequate retirement savings balance and the ability to implement appropriate strategies of drawing down income and managing longevity risks,” said Mr Rantall.
Despite this, only 2.5 million Australians use a financial adviser.1 Appetite for seeking advice has increased with 33% more people intending to see a financial planner in the next two years. This represents an increase from 1.5 million intending to seek advice in 2013 to 1.9 million in 2014. However not all may do so.2
The Financial Planning Association wants to see those who intend to seek advice actually do so as a significant step in filling the shortfall between superannuation balances and realistic retirement funding. It is focusing on intensive educational and awareness initiatives to do so.
The FPA has proposed in its recent Federal Budget submission to the Government that financial planner consultations be tax deductible, to help address th issue of the high cost of advice deterring consumers.
This is particularly important for those who need better access to financial advice for example people who have a period out of work such as parents (typically mothers) or younger people who are unemployed (Youth unemployment has risen to 14.2% as of January, 2015).
The FPA is working hard to change consumer’s perception of the industry and financial planners, in order to encourage them to seek the advice they need to secure their long term financial futures.
“Ultimately, we believe that everyone should have access to good financial advice and we want to see more than 2.5 million Australians using a financial planner.”