The Actuaries Institute, while supporting the MyRetirement framework, has warned that a ‘one size fits all’ approach could lead to the proliferation of unsustainable retirement products.
Treasury is consulting on the introduction of Comprehensive Income Products for Retirement (CIPRs), which was the term used when they were recommended by the Financial System Inquiry, also known as MyRetirement products, which is the Government’s preferred term.
The MyRetirement framework is, according to Treasury “intended to increase individuals’ standard of living in retirement, increase the range of retirement income products available, and empower trustees to provide members with an easier transition into retirement”.
The Actuaries Institute, in a submission, said that it supports any effort to change the focus from lump sum payments to an income in retirement.
However it also said that the Government must resolve the treatment of such income products under the asset test and allow super funds to offer flexible products that meet retirees’ needs. The submission warns that a prescriptive approach could allow “sub-scale, unsustainable products to proliferate”.
“The right approach is to start with a framework and then let this drive the products. The framework must meet the government’s stated aims and address members’ needs and interests, including whether longevity protection products meet individual fund members’ requirements,” said President of the Actuaries Institute, Jenny Lyon.
“There should be scope for the policy approach to be reviewed as the product landscape evolves. It should not be compulsory to offer a particular type of retirement income product until we see how the market develops. Instead, an ‘if not why not’ regime could be introduced, at least initially, where funds are required to justify the appropriateness of their retirement income products for its members.”
“There are benefits in allowing a less prescriptive approach because the current market and legislative rules around post-retirement products are immature,” Ms Lyon said.
“We also look forward to seeing clarity around how these products will be means tested.”
The consultation period on the Development of the framework for Comprehensive Income Products for Retirement has been extended again. The original due date was 28 April 2017, this was extended to 9 June, and now to 7 July 2017.