Removing the impediments that currently hinder the development of new retirement income-stream products will help facilitate product innovation, according to the Association of Superannuation Funds of Australia (ASFA). The statement comes in response to a submission by the Centre of Excellence in Population Ageing Research to the Financial System Inquiry, which recommended a broadening of the menu of post-retirement products available to retirees. ASFA agrees that now is the time for decisive action.
ASFA CEO Ms Pauline Vamos says the superannuation industry is entering a new era of product innovation, which governments could actively facilitate by removing the various impediments related to income-stream products dealing with the impact of longevity.
"The superannuation industry is ready and willing to inject some much-needed innovation into the post-retirement income-stream product market. A suite of regulatory changes should be made by the government to help facilitate this process.
"The government has indicated it will commission a review into the factors which impede the provision and development of such products. It is ASFA's view that this review should be expedited in light of the growing need to increase the range and flexibility of such products for Australia's growing pool of retirees."
ASFA recommends that, at a minimum, the following eight impediments should be removed to help boost the post-retirement product market.
Removing the eight impediments to post-retirement products
- Amend the SIS regulations to:
Amend the APRA prudential standard applying to minimum surrender values of pension and annuity products to reflect the special characteristics of such products.
Amend the means test applied by Centrelink to exempt deferred annuities from both the asset and income tests during the period prior to payment.
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 coordinated basis.
Develop a specialised accreditation for the provision of retirement and post-retirement financial advice.
Make legislative amendments to provide tax treatment for deferred annuities and other products that is comparable to that provided for existing post-retirement products.
Permit trustees of a self-managed super fund (SMSF) to purchase deferred annuities, and like products, on behalf of an SMSF member.
Review the system's design to allow MySuper products to become MyPension or likewise products.
- provide equivalent treatment of post-retirement products offered by life insurance companies and by superannuation funds, preferably through the development of regulations which apply to both
- set out general required characteristics for longevity products rather than mirror the specific characteristics of existing products in the market
- allow funds to offer products that provide a deferred benefit past normal retirement age.
"Creating a more favourable environment, and removing the taxation arbitrage that exists between different types of products will deliver the product innovation and choice required to meet the needs of Australia's retirees," Ms Vamos concluded.
For further information, please contact:
Lisa Chikarovski, Media Manager, 0451 949 300.
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, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.