How the super system is failing everyday retirees

Super confusing. For many people, this feels like a foreign language, full of jargon and rules that don’t make much sense unless you study it every day. While it can be quite confusing for the average person who doesn’t deal with it often, it is a tool they should be able to use with confidence to build wealth for retirement.

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I can already hear outside advisors smugly saying: “If it were his advice, we would announce it.” But the reality on the ground is much bleaker. At an industry event this week, the president of the Financial Advice Association Australia revealed the latest figures.

The FAAA, the nation’s largest professional advisory body, now has just 10,799 financial advisors left. And there are only 1158 students to replace them. This is it. In a country of 27 million people.

And most other consultants operating in the country are not FAAA members, meaning they do not meet their professional standards. This is frankly worrying. I think then we won’t rely on professional advisors to solve the problems of ordinary people approaching retirement.

So what happens to people like Margy? Who are doing their best to save, plan ahead, use the system as designed, but who can’t get help when they need it? How can we make sure the system serves them rather than the other way around?

If you listen to the loud voices at the table, they will say, “We need to fix financial advice.”

But in Britain they have already faced this problem and have largely given up on rebuilding their advice channels. The economy is not getting better.

Training professionals in a field where profits are small, compliance is laborious, and consumer needs are huge has become unsustainable except for the wealthy, where margins still make sense.

Here in Australia some funds are trying something different. Aware Super, AMP, and Hostplus are quietly developing new ways to guide members like Margy, not by replacing humans with bots, but by blending the two.

Margy could have saved herself two hours of waiting and a lot of unnecessary stress if she had logged into a smarter digital system that could instantly recognize when she had made a personal contribution, explain what it meant in plain English, and offer a short video or chat option to guide her through the next step.

But we don’t talk about it as loudly as we demand that financial advice be fixed. But this is probably the most realistic and scalable path forward for the Margys of the world.

This is what properly implemented digital guidance in retirement might look like. This is still advice; it’s just presented in a more humane and accessible way. It’s about giving people clear instructions when they need it, not trapping them in a loop between a call center and the ATO that doesn’t fully understand the rules.

Because Margy didn’t need an hourly financial planner. He just needed someone or something to guide him clearly, at the right time, with the right words.

The simple answer Margy couldn’t get

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The maddening part? When I explained privileged and non-privileged contributions, the answer to his question was clear. And it’s a healthy combination of education and guidance; All are permitted under retirement financial advice today, if funds are proactive in providing assistance. And it makes sense, as this is the most frequently asked question during tax season.

Since Margy had already paid marginal tax on her personal contribution to her retirement (it was after-tax income), she wanted to claim it as a concessional contribution. All he had to do was apply Notice of Intent to Claim Personal Super Contribution or Change Deduction Create a form with funds before submitting your tax return.

It would go something like this: Once the fund received and accepted the form, it would reclassify the contribution as concessional, meaning it would be taxed at 15 percent within the fund instead of its own marginal rate (say, around 30 percent).

When he later claimed the deduction on his tax return, the ATO would refund or make up the difference, effectively giving him back the extra tax he had already paid.

It could be as simple as a single form, a single step, and there would be no confusion. It could have saved hundreds, possibly thousands of dollars.

But he remained on hold for more than two hours before being told to call someone else.

Bec Wilson is the bestselling author How to Have an Epic Retirement and new releases Prime Time: 27 Lessons for the New Middle Life. Writes a weekly newsletter epicretirement.net and hosts prime time podcast.

• The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making financial decisions.