Financial Services Minister Kelly O’Dwyer outlined the progress the Government is making in encouraging trustees to assist their members by designing and offering appropriate retirement income solutions.
“Clearly, the retirement phase needs some work,” Ms O’Dwyer told a Financial Services Council forum in Sydney. “Our system is not managing the most fundamental risk in retirement: outliving our savings.”
She said trustees should be helping members by designing income solutions to meet their needs and by cutting the complexity of the decisions they have to make about retirement.
In recent months, the government has acted to support more innovative solutions by removing tax barriers to new income stream products. Ms O’Dwyer also is working with the Social Services Minister to determine the social security treatment of products that will form components of CIPRs.
“This is a necessary first step to rolling out the framework to facilitate superannuation trustees developing and offering comprehensive income products for retirement for their members,” she said.
Significantly, the Minister strongly endorsed the need for funds to establish a retirement benefit framework, something the CSRI has been championing for the past year.
“While trustees have a number of important obligations – including to consider the investment strategy, risk and appropriateness of insurance — it is surprising that there is no specific obligation to consider the needs of members in retirement. That needs to change,” Ms O’Dwyer said.
The Minister’s speech followed almost 12 months of consultation by the Australian Treasury about a regulatory framework for comprehensive income products for retirement, or CIPRs, a key recommendation of David Murray’s financial system inquiry.
Ms O’Dwyer said the Treasury consultation process had shown widespread support among market participants for CIPRs, as well as broad agreement for the idea that funds should offer multiple products, designed for the needs of different member segments.
However, there was a range of views about specific design and implementation issues, including who should and shouldn’t be offered a CIPR and the likely extent of take-up by trustees and members.
The Minister said the government would undertake further consultation with the industry before finalising the regulatory framework.
Full speech here.