QSuper chief investment officer Brad Holzberger says comprehensive income products for retirement help address pensioner longevity but he’d be disappointed if the industry couldn’t come up with better alternatives.
Speaking at a Productivity Commission hearing in Brisbane last week, Holzberger said greater debate was needed around CIPRs. He said QSuper has developed alternatives to CIPRs but has no plans to provide a default offering just yet.
“We’re not yet going to launch a CIPR, as we’d like to see more debate about it,” Holzberger said. “The evidence we have is that our members at and approaching their retirement become involved and start to make choices and you have to respect that.
“I’ve seen a MyRetirement, or CIPR, concept as an obligation on the trustees to put into the world a product, system or service that would recognise their best thinking and maybe their members would be led by it.”
Holzberger added that QSuper uses member data to inform its product decisions and notes that there are helpful patterns in that information about how people engage with super at the time of retirement. For example, the fund uses information about the different behaviours of male and female members, which can help it adapt products to their needs.
“The actions of people in retirement are interesting, as they may not be totally rational, but we see a lot of consistencies in what they do,” he said.
Post-retirement products are one of the government’s main agenda items in its review of the super industry. To this end, Treasury recently wrote a position paper as part of the 2018 Federal Budget that called for a new super law covenant that would ensure improvements in the post-retirement phase. The proposal seeks to reduce the risk of people running out of money in retirement by delivering higher incomes through pooling mechanisms.
Investment manager Challenger backed the proposal ahead of the other regulatory measures the Productivity Commission has proposed to improve super and said current post-retirement products are lacking.
Commenting on the submission, Challenger retirement income chairman Jeremy Cooper says providing income in retirement is fundamental to the purpose of super but there is no retirement-specific governance framework.
“Our super system is more mature than most people realise,” Cooper says. “It’s doing the first part of its job, allowing people to accumulate assets through their working lives, with typical household super wealth at retirement in the $350,000-$500,000 range and increasing. This wealth was accumulated to provide income in retirement, but the system is not yet set up to do this next phase successfully.”
Financial services consultancy Rice Warner is also supportive of the super law covenant, although it has identified several potential issues with the structure and implementation of the proposed CIPR framework.
Among Rice Warner’s concerns are the cost of CIPRs for members, that products should not be mandated for longevity protection and that CIPRs need to be part of a default retirement strategy to succeed.
While the consultation process for the Treasury paper finished in June, the Productivity Commission’s draft proposal, Superannuation: Assessing Efficiency and Competitiveness is still inviting written submissions by July 13.
A final report will be prepared after further submissions have been received and public hearings have been held. It will be forwarded to the Australian Government at a date to be advised.