Challenger chief Nick Hamilton calls for big thinking on retirement amid inflation turmoil

Challenger boss Nick Hamilton warns that the government must improve access to financial advice to provide a secure retirement for Australians as part of plans to change superannuation.

Challenger chief executive Nick Hamilton has called for bold reforms to superannuation. Picture: Britta Campion.

Retirement income heavyweight Challenger has called for the government to ensure any changes to superannuation are coupled with a move to open access to financial advice to ensure Australians face a more secure retirement.

Writing in The Australian on Monday, Challenger chief executive Nick Hamilton warns incremental changes to superannuation risked fiddling around the edges of a policy framework, without a view to bigger systemic reforms.

Mr Hamilton, who has run the retirement income giant since January last year after more than five years in the group, said the Albanese government should look to embrace Michelle Levy’s proposal to fix financial advice alongside changes to superannuation.

“The advice reforms are positive but we need to ensure proposals such as the ‘good advice’ test are tied to the outcome of the Covenant to maximise retirement income,” he writes.

“Affordable financial advice will play a pivotal role in contributing to, and strengthening, the financial wellbeing of retirees as it ensures the purpose of super and the objective of the Retirement Income Covenant are realised.”

The Challenger boss notes the government risked “one set of reforms diminishing the other”.

“You cannot realise the purpose of super if it’s not effectively delivered through the Covenant and people can’t access affordable financial advice,” Mr Hamilton said.

Separately, Mr Hamilton told The Australian there needed to be more options for retirees to draw down their superannuation balances and ensure financial comfort.

Mr Hamilton said the proposal to legislate an objective for retirement came at an opportune moment, as inflation played havoc with expected savings balances.

“All this is pretty important right now because this is a pretty unique time in Australian history with people retiring with life expectancies, far in excess of what they had historically, into a high inflation world,” he said.

“The interplay there is the purpose of super fitting into the retirement income, super but it needs to be able to enabled by advice.”

Mr Hawkins said there was an opportunity for “seismic change and success for Australia” if the government considered the changes to super and advice together.

“We’ve saved a huge amount of money as a nation, now what we need to do is create the settings to bring households the benefit of those savings which has incredibly positive knock on effects for Australian society,” he said.

Challenger is one of Australia’s leading retailers of fixed income providers, with the group’s plans to shed its bank in a $36m deal with New Zealand’s Heartland Group set to further focus the retirement operator.

The diversified financials group offers annuities pegged to both the cash rate and the official inflation rate.

Mr Hamilton said the challenge highlighted by the debate around hefty super balances showed the need for more “off-ramps” for retirees.

“The real story is how you give confidence to all Australians who will flip from receiving a fortnightly or monthly paycheck to confidence of an income that comes in every month,” he said.

“We know that people are too scared to spend their money in retirement and live a very frugal retirement which doesn’t really serve the purpose of superannuation.”

Mr Hamilton said the recent period of low interest rates had presented issues for retirees, with many struggling to access returns.

Australia’s cash rate slipped below 1 per cent in October 2019, not returning above that level until July 2022.

Mr Hamilton said the recent increase in rates was a “normalisation” and presented better earnings outcomes for Challenger’s annuities.

But he said Challenger did not take interest rate risk and was not exposed to similar interest rate accounting crisis that led to the blow-up of Silicon Valley Bank.

“We mark to market those fixed incomes every day which make us very different to SVB,” Mr Hamilton said.

Meanwhile, the “dislocation” in investment markets in recent weeks presented opportunities, he said.