Clients fearful of spending their super

Better education is needed to encourage retirees to spend their superannuation.

Speaking to Super Review, John Hazell, financial planner at Richmond Partners, said he often had to prompt clients that is was OK for them to spend money.

“They squirrel away and are really unsure about spending it unless I say it is possible, they want the adviser to say it’s ok and that’s a big responsibility.

“I have to argue with them to spend, they want to save it for their kids but it means a frugality of spending. They are doing less travelling, spending heavily on their family, some groceries and bills, some of them have very meagre living costs.

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He said super funds had begun to make efforts to educate members on retirement but they “could do a lot more”.

Funds regularly sent statements to their members with their forecasted retirement income but Hazell said this sometimes left them under the impression that this was all they could spend.

Patrick Clarke, general manager at Generation Life, said: “The Government wants people to spend but without advice, those people are paralysed by fear. There is a real need for education on spending and saving.

“The number of people entering retirement is high because of baby boomers and they have years of contributing to super so this will only get higher thanks to the Super Guarantee.”

Clarke said lifetime annuities could offer a solution by allowing them a guaranteed income which would reduce uncertainty about running out of money but that it was better to have multiple different income streams.