• David Hufton, Sygnia Deputy CEO

Helping members make better retirement choices

We all make better decisions when we have access to information. This is why, under the new default regulations for retirement funds, every fund must ensure that members have access to free retirement benefits counselling at important stages in their retirement journey.

This counselling is not financial advice, as its purpose is not to make recommendations, but it should ensure that members have access to all the key information they need to make informed decisions about their retirement savings – including the need to obtain professional advice.

What is retirement benefits counselling?

In reality, few investors fully understand the long-term implications of the investment decisions they may need to make – not because they are ignorant or too lazy to find out, but because these decisions are quite complex. This is particularly true of choosing an investment strategy and understanding the implications of withdrawing and spending retirement benefits.

From 1 March 2019, all retirement funds must offer retirement benefits counselling at three key stages to ensure that members have the information they need.

The first instance of counselling should occur when a new member joins a retirement fund and is asked to choose their investment strategy and portfolios. Retirement benefits counselling at this stage should explain the fund’s default investment portfolio/s, how they work, and what they cost. New members must also be informed of the option to bring across any retirement savings from other funds.

Secondly, retirement benefits counselling should be available to those members who have left employment and thereby become paid-up in their retirement fund. If members wish to withdraw their benefits or transfer them to another fund, information on the tax implications and long-term financial impacts of doing so must be made available to them.

Finally, at least three to six months prior to their retirement date, every member should be given access to counselling that provides details of the options available for turning their retirement capital into income, including detailed information about the fund’s own recommended annuity strategy.

Why it’s important

This counselling must provide and explain, in clear and easily understandable language, what options are available to the member and what the costs, risks and tax implications are. As legislation does not specify exactly how this should be done, the counselling may be offered in writing, through a contact centre or face-to-face.

No matter how it is offered, the intention must always be to improve outcomes for members, and it must always be delivered in a way that members can relate to.

By disclosing the options and risks facing members at these key moments, members will better understand their circumstances and be in a stronger position to protect their interests.

Nobody cares as much about your retirement as you do, so it is critical that you have all the information you need to make informed decisions about achieving your retirement goals.


Article Posted 11 April 2019 - Sourced from Sygnia Website


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