The Government’s proposed Comprehensive Income Products for Retirement (CIPR), also known as MyRetirement, framework has come under sharp criticism from the superannuation industry.
The Government has been slowly progressing the CIPR/MyRetirement framework, which follows from a recommendation in the Financial System Inquiry final report (released in late 2014), most recently with the establishment of an advisory group.
The Association of Superannuation Funds of Australia (ASFA) says CIPR is “neither necessary nor sufficient to achieve its stated objectives” as it is currently designed.
Additionally “there is the risk that a CIPRs framework will be designed that, rather than maximising member benefit, will see little take-up and fail to achieve the necessary scale or desired consumer outcomes,” says ASFA in its submission on CIPR.
The Financial Planning Association of Australia opposes the MyRetirement framework, even as a “soft-default regime for ‘disengaged’ members”.
Industry Super Australia says the CIPR framework is not supported by evidence, forces choice on new retirees and “risks reproducing the underperformance of existing retail retirement income products”.
Though not all responses to CIPR are negative, particularly if it is confined to an opt-in basis. The Financial Services Council is supportive of CIPR, provided it is flexible, optional and involves “light touch” regulations.
National Seniors Australia says there is “considerable merit” in the CIPR concept, if it is opt-in.
Research firm Chant West says that the lack of longevity risk solutions is probably the most important gap in the superannuation system, and CIPR is a possible solution. However the submission also says that having a default option in retirement phase is problematic as needs in pension phase are “far more varied” than when members are in accumulation phase.
“Indeed, it is likely that a fund’s default CIPR will only be appropriate for a small group of members and will not meet the needs of the majority of members to whom it is applied. This would be a very poor policy outcome. While the goal of a CIPR may be ‘one size fits most’ we expect the outcome will actually be ‘one size fits very few’,” says Chant West.
Minister for Revenue and Financial Services Kelly O’Dwyer has announced the establishment of a consumer and industry advisory group “to assist in the next phase of development for a framework for Comprehensive Income Products for Retirement (CIPRs)”.
“The central task of the reference group is to provide feedback and advice to Treasury on possible options and scope of a retirement covenant in the Superannuation Industry Supervision Act 1993. This would require superannuation trustees to design and offer appropriate retirement income solutions to their members,” said the statement by the Minister, which does not use the Government’s previously preferred term ‘MyRetirement’.
The Government released a discussion paper on the development of the CIPR/MyRetirement framework in December 2016. The submissions have only recently been released, despite the closing date of 21 July 2017.