The Treasury has debunked a few myths surrounding Comprehensive Income Products for Retirement (CIPRs).
According to Jenny Wilkinson, head of the Treasury’s retirement income policy division, CIPRS are not intended to:
- encourage annuities over other products
- compel individuals to take longevity products as “there is no element of compulsion in CIPRs anywhere”
- to eliminate bequests from super, as that is a choice that the government is very keen to leave with individuals
- and it is also not designed to replace the need for financial advice.
“It is very important that everybody understands that nobody will be defaulted into a CIPR, and an active choice will need to be made by the member to take it up,” Wilkinson said to delegates at the Committee for Sustainable Retirement Incomes (CSRI) Leadership Forum.
In the Treasury’s view, CIPRs would be soft default retirement income products, which trustees would preselect or offer to members. More specifically, it is expected to be a portfolio of products that provides a balance of features, such as default income, risk management features and flexibility.
Wilkinson added a CIPR should enable an individual to have a much higher standard of living in retirement because it manages longevity risk.
“Some of the data provided in FSI (Financial System Inquiry) report suggests you can increase income in retirement in the order of 25 per cent. There are very few reforms in the public policy area that will deliver change in that order of magnitude,” she said.
Questions still to be answered
Wilkinson added there were still many questions about CIPRs that the Treasury was still considering, and wanted input on from stakeholders.
- Are there minimum features or requirements that every CIPR should have?
- Should there be situations where a CIPR is not offered?
- Do all trustees have to design CIPRs?
- What can be done to make it easy for individuals to compare CIPRS with one another?
- And, as CIPRs is not a very catchy name, what should it be called?
“The government is considering releasing a special paper by the end of the year that will be outlining what the key policy positions are and also what some of the options are for developing this framework.
“My guess is there will be quite a long consultation process around these discussion points, in order to make sure we understand the [different] perspectives and where these come from, to make sure we are all on the same page, and to make sure we get the framework right.”