A well-regarded but clumsily named policy push to force all superannuation funds to offer default members a comprehensive income product for retirement (CIPR) is set to be re-branded.
The government has proposed rebadging CIPRs “MyRetirement” products, arguing it would be “a more consumer-friendly and meaningful name”.
This would fit with the naming convention of the MySuper licensing regime. MySuper products are low-cost, no-frills, default super accounts for working-age savers. Since January 1, 2014, it has been mandatory for employers to select a MySuper default fund for their workers.
In December 2015, the Turnbull Government said it would accept a recommendation of the 2014 Financial System Inquiry (led by former Commonwealth Bank boss David Murray) to force all super funds to offer retiring MySuper members CIPRs as an alternative to a lump-sum payout.
The 2014 inquiry reported that incomes from more innovative retirement income products could be 15 per cent to 30 per cent higher than those from the current typical strategy of drawing the minimum amount from an account-based pension.
The minister for revenue and financial services, Kelly O’Dwyer, said the introduction of a MyRetirement regime was an “important reform” that would help “lift the living standards and choices” of older Australians.
“There are seldom other reforms that offer such large potential increases in income without a cost to taxpayers,” O’Dwyer said. “The government will facilitate trustees offering MyRetirement products to provide an anchor to help guide individuals in their retirement income decision-making. Importantly, individuals won’t be forced to take up these products.”
MyRetirement consultation closes April 2017
The mooted CIPR re-brand to MyRetirement was one of the issues included in a retirement income product discussion paper the government released for consultation on Thursday, December 15, 2016.
The other three main issues featured in the paper were the structure and minimum requirements of these products, the framework for regulating them, and the best way to encourage members to adopt them.
The discussion paper is available on the Treasury website. Written submissions are due by April 28, 2017.
MyRetirement products are expected to provide a balance of features, such as default income, risk-management tools and flexibility, head of Treasury’s retirement income policy division, Jenny Wilkinson, told the Committee for Sustainable Retirement Incomes (CSRI) Leadership Forum in October.
The CSRI had suggested the products be called Sustainable Lifetime Income Products for People in Retirement (SLIPPeRs).
Annuity market leader Challenger has been particularly keen for a review into retirement-income products, as current regulations have stopped it from offering deferred annuities, which have the potential to mitigate longevity risk – a key issue in any effective retirement strategy.
The need for an effective policy framework has become increasingly pressing, as millions of baby boomers now stand on the cusp of retirement. Last year’s Intergenerational Report projected that by 2054-55, the number of Australians aged 65 and over will more than double, while one in every 1000 people will be aged over 100.
This ‘silver Tsunami’ has the potential to dent the Treasury’s budget through Age Pension entitlements, and to reshape superannuation funds through the massive shift in assets from the accumulation to de-accumulation phase.
Industry experts have urged the government to develop a framework for retirement-income products that can integrate with the other key pillars of the retirement phase of superannuation, such as the age pension, aged care and health care, housing and financial advice.