Comprehensive income products for retirement, or 'CIPRs', will be one part of Australia's retirement income system and are far from being "actuarial fraud", says Financial Synergy founder David Orford.
David Orford, who sold his superannuation software business Financial Synergy to IRESS for $90 million in September 2016, refuted comments by Sunsuper national manager for corporate business Ray Murray that labelled CIPRs as "actuarial fraud".
Mr Murray, who spoke on his own behalf at the Actuaries Institute conference on Monday, said there would be no member demand for CIPRs and sharply criticised the government's decision to compel super funds to provide them.
In response, Mr Orford – who launched longevity-risk focused Optimum Pensions in late 2017 – said the words "actuarial" and "fraud" are inappropriate and inaccurate assessments of CIPRs and "should be ignored".
"There is a growing recognition [within the superannuation and insurance sector] that a lifetime retirement income has the potential to create significantly better incomes and lifestyles for all retired Australians. [It will also benefit] the super fund by way of member retention and increased funds under management," Mr Orford said.
"In relation to demand, lifetime income streams may not be attractive to everyone – at least not initially. Few products achieve that status. It is a known fact that members need help making important, permanent decisions at retirement (eg, from a financial planner)," he said.
"The recently proposed principles for the Retirement Income Framework covenant recognise this and are designed to make the decision-making process easier."
The claim that there will be a high cost to super funds to develop CIPRs is "also misleading", he said.
"There is already a cost to their business as they lose members to financial planners of other wealth managers. If a super fund can administer an account-based pension, then it ought, with a bit of help, be able to administer a lifetime income stream including a CIPR," Mr Orford said.
"Don’t forget – the main purpose of superannuation is to provide an income to each member for life."
"Funds know they need to address how they achieve their Core Purpose and also best retain members when they retire. Lifetime income streams including CIPRs are key to solving that puzzle," he said.
Sunsuper disavowed Mr Murray's comments on Tuesday, saying that its "corporate position" is that it "strongly supports the work the government is doing to improve the efficiency and effectiveness of the retirement income system".
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