Minister for Revenue and Financial Services Kelly O’Dwyer said the government hoped to develop a framework for comprehensive income products for retirement (CIPRs) to improve the country’s retirement income system.
“Although there has been significant focus on reform to the accumulation phase of superannuation over the past two decades, the Murray Inquiry concluded that the retirement phase of Australia’s superannuation system was underdeveloped and could better meet both the risk management needs of many retirees and the objective of the superannuation system,” she said.
“Getting the policy settings of the retirement phase of the system right is critically important to ensure as a country we meet this challenge by delivering better retirement outcomes for retirees and ensuring the sustainability of the superannuation system for generations to come.”
The Treasury issued the consultation paper seeking feedback on the proposed structure and minimum requirements for CIPRs, as well as the regulatory framework used to govern them and the ways in which they can be offered.
The paper proposes CIPRs “deliver a minimum level of income that would generally exceed an equivalent amount invested fully in an account-based pension that is drawn down at minimum rates” while providing “a stream of broadly constant real income for life” and remaining flexible in case a retiree needs to access a lump sum or leave a bequest.
“These features would be required to be delivered by a CIPR when considered as a whole – that is, each feature could be satisfied by one or a combination of the underlying component products of the CIPR,” the paper said.
Additionally, the paper proposed that CIPRs meet a set of “minimum prescribed, principles-based requirements” so the system can be standardised and different CIPRs compared with one another.
Standardisation of CIPR requirements would also simplify the framework of the system for individuals and “ensure that the ‘CIPR’ label represents an assurance of certain minimum or common features”.
The consultation paper describes CIPRs as a “soft-default” option, with retirees maintaining the right to choose whether or not to use such a product – echoing comments made by Ms O’Dwyer in October that “people will not be forced to have these products”.
The consultation paper is available through the Treasury website and is open for submission until 28 April 2017.
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