Platforms slow to respond on transitions to retirement

The commencement of the Federal Government’s transitions to retirement initiative has been extensively welcomed and discussed, but platform providers appear in no hurry to add features that will allow clients to access the changes.

The transition to retirement measures, which came into play on July 1 this year, are part of the enhancements to the retirement income system that were announced in the Federal Government policy document A more flexible and adaptable retirement income system released on February 25, 2004.

To implement the measures, the Superannuation Industry (Supervision) Act 1994 was modified to allow superannuation fund members who have reached the preservation age (55 years at present) to access their retirement benefits as income streams, even while they are still working, and without having to meet the sometimes restrictive conditions of release.

IFA Securities general manager and authorised representative Ronald Ogilvie said while his organisation had not yet tested any products to see whether they could handle the changes, he saw immediate opportunities for some of his group’s clients. He said he hoped it would be as easy for advisers to set up transitions to retirement arrangements as it currently was to transfer assets from a super fund to an allocated pension.

“I wouldn’t like to feel I have to go and start a whole new account for example,” he said.

Data from the Australian Bureauof Statistics suggests more people, particularly men aged between 60 and 64, are easing into retirement through part-time employment. Those falling into this demographic are widely expected to benefit most from transitions to retirement.

While the rules are in place and the demand is apparent, some platform providers have not prioritised making changes to their platforms to support the amendments.

Skandia, for example, is yet to include features that give access to the initiative on its platform, while Colonial First State and Asgard similarly have no immediate plans to modify their products. Spokespeople for the companies said such changes would be discussed in coming weeks.

Navigator is one of the first platforms to respond to the initiative. The company’s group director of products, marketing and public affairs, Rob Donaghy, said the platform provider has changed several of its products, including Navigator Personal Retirement Plan — Super and Pension Services and Navigator Super Solutions — Lump Sum Option and Allocated and Growth Pensions to accommodate transitions to retirement.

He said it would also be available in the new Navigator Access Super and Pension product that is due for launch in August 2005.

“Customers can now have multiple accounts. They can have a pension account as well as an accumulation account, and it gives the ability to switch backwards and forwards and track that. They can take their accumulation benefit and say, ‘I now want to move that across into a pension and buy an income stream or part income stream’, but down the track they may be able to move that back.”

Donaghy said it was important that the products did not allow regulatory requirements to be breeched.

“While [investors] can take an income stream to supplement their income, they are not allowed to then commute that into a lump sum and take it out of the super environment. There’s got to be an indicator on the system saying it’s a special type of income stream which is non-commutable.”