Funds that don’t look beyond the Financial System Inquiry (FSI) will fail to create successful post-retirement products believes FSI committee member Professor Kevin Davis.

The design of products not only needs to take changes to regulation into account – as yet an unknown variable – but the whole of life after retirement, according to Davis.

“We need to be aware the issues are not just around super, but include accommodation, health and age care, which stretch beyond the scope of the FSI. It is much broader and complex,” he said. “Any attempt to design products needs to have in the back of the mind these other determinants.”

Professor Davis, research director at the Australian Centre for Financial Studies, adds that the tax inquiry is another part of the system that will need to be considered, as well as balancing out both sequencing and longevity risk.  “There is the difficulty of managing both together,” he said.

While Davis believes funds should be looking beyond the FSI, he stands by its recommendation on the creation of new post-retirement products. He said: “Simulations suggest pooling the risk could increase retirement income by 10 per cent or more.”

The reports other suggestions, such as majority independent boards for funds, he firmly supports.

The Hon Josh Frydenberg, the minister responsible for retirement savings, remarks on the super industry last week hint that the government’s view is closely aligned with FSI, though no formal position on the FSI has been announced.

Professor Kevin Davis will be talking on the subject of ‘Regulatory insights – what products are permissible’ at the 7th annual Post Retirement Conference on March 10.

To find out more about the conference visit https://www.etouches.com/ehome/index.php?eventid=110520