Removing the seven impediments to retirement income stream products: ASFA

The Association of Superannuation Funds of Australia (ASFA) today called on the Government to address the regulatory impediments to retirement income-stream products, to ensure all Australians have adequate income to fund the lifestyle they want in all of their post-work years.

Speaking ahead of the ‘ASFA Unpacks: Deferred lifetime annuities and more’ event in Sydney today, acting ASFA CEO Mr Ross Clare said, with an increasing number of Australians entering retirement, removing regulatory barriers to the development and use of post-retirement products is more critical than ever before.

“While we all want to live a long life in retirement, sometimes this can have financial consequences, which is why developing products which address longevity risk is crucial. With the Government committed to addressing the impediments which hinder the development and use of retirement income stream products, now is an opportune time to consider the positive adjustments that can be made to help facilitate this.

“As a starting point, ASFA recommends the following suite of regulatory changes which we believe will help encourage industry to develop innovative post-retirement products and give consumers the confidence to invest in them,” said Mr Clare.

Removing the seven impediments to deferred annuities

1. Amend the SIS regulations to:
   a. provide equivalent treatment of post-retirement products offered by life insurance companies and by superannuation funds, preferably through development of regulations which apply to both
   b. set out general required characteristics for longevity products rather than mirror the specific characteristics of existing products in the market
   c. allow products which provide a deferred benefit past normal retirement age to be offered.
2. Amend the APRA prudential standard applying to minimum surrender values of pension and annuity products to reflect the special characteristics of such products.
3. Amend the means test applied by Centrelink to exempt deferred annuities from both the asset and income tests during the period prior to payment.
4. Put a new administrative arrangement in place so that the ATO, APRA, ASIC and Centrelink undertake the assessment of new post-retirement products on a consistent and co-ordinated basis.
5. Develop scaled advice operating guidelines to allow funds to provide members with limited advice relating to retirement products.
6. Make legislative amendments to provide tax treatment for deferred annuities and other products which is comparable to that provided for existing post-retirement products. For example, ensure benefits received from annuities are tax free for those 60 and over, and also ensure the investment earnings supporting deferred annuities and other longevity products are tax-free within a superannuation fund or life company.
7. Permit trustees of a self-managed super fund (SMSF) to purchase deferred annuities and like products on behalf of an SMSF member.

To view Mr Clare’s research report discussing the seven impediments to retirement income stream products, click here.

For further information, please contact:
Lisa Chikarovski, Media Manager, 0451 949 300

About ASFA
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation whose aim is to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.