The Government has announced the start date for Comprehensive Income Product for Retirement (CIPR) will be pushed back two years, to July 2022.
CIPR was originally a recommendation of the Financial System Inquiry (FSI), and the Government has slowly been progressing the policy. A July 2022 start date would mean it was around 7.5 years between the recommendation of the FSI and the product being available to consumers.
Comprehensive Income Product for Retirement (CIPR): a retirement income product pre-selected by the trustee, which balances competing objectives in retirement – maximising income, longevity risk management and access to some capital.
The CIPR concept has been strongly criticised by the superannuation industry, including calling it “neither necessary nor sufficient”.
Speaking at a Financial Service Council event on Wednesday, Assistant Treasurer Stuart Robert said: “Today I’m pleased to announce the Government is working with industry to develop a retirement income framework (RIF) that increases retirement income product choice for retirees.”
Retirement Income Framework (RIF): Includes CIPR, the Retirement Income Covenant, and other disclosure and regulatory changes.
“The RIF will aim to facilitate the development and take-up of comprehensive innovative retirement income products, or CIPRs, that better manage longevity risk through risk pooling,” he said. The Minister may have simply been misspeaking when inserting the word ‘innovative’, or it could be a second attempted re-brand – like the seemingly dropped ‘MyRetirement’.
“These products would generally allow individuals to draw a higher income while retaining flexibility and reducing the risk of outliving their retirement savings,” he said.
In addition to the two year delay to the introduction of CIPR, the Minister also announced that the proposed minimum superannuation balance at which super funds would need to offer such a product would be raised from $50,000 to $100,000.
“By raising the threshold account balance, CIPRs will be required to be offered to those who will benefit most,” said Mr Robert.
The delay to the CIPR start date would not apply to the Retirement Covenant – which would start on 1 July 2020.
Retirement Income Covenant: A change to the SIS Act which would add a retirement income covenant to the existing investment and insurance covenants on super fund trustees. Trustees – including of SMSFs – would be required to have a retirement income strategy.
“By extending the transition period, the industry will gain more time to adjust to new requirements under the retirement income covenant and produce higher quality retirement products. This will lead to better outcomes for superannuation fund members,” said Mr Robert. He also said the changes were based on feedback from the consultation process.
FSC welcomes CIPR changes & retirement income covenant
The Financial Services Council has welcomed the announced changes.
FSC CEO Sally Loane said the higher threshold for CIPR “recognises the need to align retirement income products to the needs of individual members”.
“Increasing the minimum superannuation balance for offering a CIPR will help to ensure that these products will only be provided to individuals who will actually benefit.”
Loane also said the retirement income covenant will “help deliver better outcomes for retirees by ensuring they can access solutions to manage the risks they face in retirement”.
Comprehensive Income Product for Retirement (CIPR) timeline:
- December 2014 – FSI recommends CIPR
- October 2015 – Government responds to FSI, accepts CIPR recommendation
- December 2016 – Government releases CIPR discussion paper, renames as MyRetirement
- February 2018 – Government establishes CIPR consumer and industry advisory group
- May 2018 – CIPR included in Budget, Government announces Retirement Covenant
- May 2018 – Government releases Retirement Income Covenant Position Paper