Episode 35: Ian Yates

Ian Yates, Chief Executive of the Council of the Ageing Australia, joins ASIC Deputy Chair Peter Kell on the podcast to discuss preparing financially for retirement.

Visit ASIC's MoneySmart website for more information on retirement income planning. 　

Click through for transcript:

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Transcript:

Peter: Hello and welcome to the official podcast of the Australian Securities and Investments Commission. My name is Peter Kell and I'm joined this time around by Ian Yates, who is the Chief Executive of the Council of the Ageing Australia and one of the terrific people who we rely on to provide ASIC with insights into the whole area of retirement. Today, we've asked Ian to talk about preparing financially for retirement. Ian, thanks very much for joining us.

Ian: It's a pleasure and thank you for having me.

Peter: As Chief Executive of COTA, Council of the Ageing, can you tell us Ian what are the main financial issues concerning your members and how does the issue of trust play out in the sector?

Ian: Peter, the financial issues facing our members are quite diverse because older Australians are very diverse and some people come off of a period of essentially either retirement or semi-retirement onto an age pension and their primary issues are living on that budget. Others come for the first time in their lives to a retirement perhaps a bit unexpectedly and receive access to superannuation benefits which is a lump sum even though it's still not a mature system, that's larger than they've had ever before, probably even larger than what they've put as a deposit on their house. And then there's what do they do with it? And frequently, that question leads people, if I can say, into making often inappropriate choices. For example, following the global financial crisis, we had a lot of people who without advice capitalised their losses, took their money out and put it in term deposits, and who now regularly tell us that they can't live off the income from their term deposits. So I think it's, actually, one of the biggest issues, is coming into retirement without preparation. And then the third would be people who are subject to, sometimes actual scams, but often just inappropriate products and services, some of which are risky, others of which may be quite genuine products but weren't appropriate to them.

Peter: That's a good introduction into the next question, Ian, that I had for you and it's around getting good advice. Because as you've said, there's certainly a degree of complexity out there in the financial situation that confronts older Australians, a complexity in many of the products they're facing, so how can older Australians be confident they are getting good advice?

Ian: At one level, Peter, the answer to that is that it's difficult because we are just in the process now of developing a better financial advice system and until we have people who the public generally understands what their training and accreditation is, and means, and indeed until we have that accreditation very properly reflecting specialities. For example, not every financial advisor understands how to advise someone of the complexities of a retirement villages contract, and yet that can have significant financial complications. A relatively simple on paper choice of someone paying for an elderly relative's aged care entry either through a refundable accommodation  payment or a daily payment actually can have quite significant financial implications for a family with a whole lot of interconnected financial arrangements. For some people it's straightforward, and for others it's not. So I look forward to a situation where we have a much stronger regulated and trained advisory force, because I think it's really critical. Very few people - we can tell them to do it - but very few people plan many years ahead. So you actually need that advice available at the right time when people are motivated to access it. I think superannuation funds have a bigger role to play in promoting advice and providing that advice. And indeed in getting people to think about what it is that they want to do in retirement  because money is there to facilitate what you want to do, the purpose of your retirement is not to preserve your finances, it's actually to live well off of them but have enough for the contingencies of aged care or health issues. So at the moment I still say that people ought to ask in their circles if they've had successful advice, they ought to seek advice from the appropriate registry authorities and they oughta talk to their super funds about who they recommend for advice.

Peter: You've made it clear in talking about advice that there are often quite a number of people involved in these sorts of decisions, not just the older Australian or the couple, and look, I think we all understand it can be a very good thing to have support from family and friends when facing these sorts of complex financial decisions, from your experience, though, what should people keep in mind to ensure that they are offering positive and appropriate support in this area?

Ian: I think it's very important that both the family members and the older people themselves take advice in areas that they don't understand, that they haven't had previous experience of. An example of that would be pooling funds for shared accommodation – what are the best things to do? It's that old adage that you actually need things written down not for when it's all going well but for when it might go wrong. So getting formal arrangements in place with family members is important, because if all goes well, the formal arrangements will be irrelevant, but if something should go wrong, then the formal arrangements will be really important.

But secondly, it's important to involve and maybe even involve with an independent person - t might be someone formally who is involved with mediation , it might be a local minister, if you're of a religious persuasion, it might be someone independent who you trust, to enable you as a family to talk through issues like forward planning for housing and accommodation, like making power of attorney and guardianship arrangements, like making arrangement for equity release from your home, all of which impact on everybody, much of which causes angst just because there was not awareness in the first place.

Peter: So, we've covered a lot of territory there – if you were to sum up, what would you say are three key things that people should do to prepare themselves for retirement?

Ian: The first thing I would say is don't assume that the first thing that pops into your head is the right answer – it may be what the whole mythology in society is saying – because this is new, to have long periods of living in retirement. The second is – don't get rushed. It's possible but it's highly unlikely that all your circumstances will change in the next two months. So it is possible to seek advice, talk with friends, if others you know have gone before you in this journey, talk to them – because they'll have had some traps that they've fallen into that you might avoid. The third really is to take advice about things you don't know about and make careful decisions that don't commit you irrevocably unless that's - for example taking a deferred annuity would commit you – but you would think that through. A lot of those decisions can be taken in steps. The – you asked for three, but the fourth would be actually to do what many people don't do which is to try and think about these things earlier than you feel pressured to like your housing arrangements or major financial investments.

Peter: Well we asked for three, we got one extra for free – thanks very much Ian Yates, Chief Executive of the Council of the Ageing Australia.

Ian: Thanks Peter.