National Seniors is concerned a proposed ‘one size fits all’ approach towards helping retirees better manage their financial risks in retirement may not suit everyone.
National Seniors last year made a submission to the federal Treasury, commenting on the initial proposal to develop regulation for new Comprehensive Income Products for Retirement (CIPRs). It is proposed super funds offer these products to help retirees better manage risks such as outliving their super.
Treasury subsequently developed a Retirement Income Covenant proposing key principles to guide super fund trustees when offering new retirement income products.
While generally supportive of the concept, National Seniors raised several key concerns in response to the Treasury position paper.
National Seniors is concerned people with limited superannuation or financial literacy could be disadvantaged because under the Treasury proposal, trustees would be required to offer a fund member a “flagship” CIPR as a starting point.
“While fund members will have to opt-in and give consent before adopting a flagship CIPR, this proposed ‘soft default’ approach may imply that it’s in the best interests of members when this may not be the case,” National Seniors’ submission said.
Strong protections for consumers, including adequate information, monitoring and oversight of guidance and advice tools, were also needed.
“We are supportive of policies to ease transition into retirement, helping retirees better manage risks and improve income adequacy,” the submission said.
“There is considerable merit in increasing the availability and take-up of products that manage longevity risk and improve income objectives for (super) fund members.”
Actuaries Rice Warner suggested in an earlier submission that members with balances of less than $250,000 would not benefit from CIPRs.
National Seniors’ own research has shown positive consumer sentiment towards improving investment options to manage longevity risk.
According to a recent National Seniors’ survey of more than 5,000 members, over half supported the inclusion of an insurance option for longevity and would consider paying 10 per cent of savings to receive income for life.
National Seniors’ submission also said members of super funds with low balances should not be forced to pay for costly financial advice to consider alternative products better suited to their needs.
“Members should be provided with adequate guidance from fund trustees to enable them to make informed choices. Monitoring and oversight of guidance and advice tools is also required to ensure adequate consumer protection,” the submission said.
National Seniors also called for corporate watchdog, the Australian Securities and Investment Commission (ASIC), to have adequate resources and powers to ensure members received appropriate guidance outside the financial advice framework.
To read a copy of the submission, click here.
To read the Treasury covenant position paper, click here.