Emulate PS sweeteners for lifetime income streams – Accountants

People should only be able to access superannuation draw-down options other than Government-selected defaults after they have received personal financial advice from a financial adviser, according to the major accounting groups.

Chartered Accountants Australia and New Zealand (CA-ANZ) and CPA Australia have also jointly opposed the idea of Australia emulating the United Kingdom via a Government-free free and impartial advice service.

“While we consider additional guidance, education and communication for retirees and prospective retirees is welcome, we believe these are only partial solutions,” the two organisations said.

“We do think APRA regulated superannuation funds could do much more to assist those nearing retirement and existing retirees. We believe any draw-down offerings different to government selected defaults should only be offered after a person has received personal advice from a financial adviser.”

The two big accounting organisations have bluntly told a Parliamentary Committee that if the Government wants people to make greater use of lifetime income streams then they are going to have to make them more attractive by emulating the incentives available to public servants.

Pointing to the fact that the Government provides assistance to public sector employees via the contribution cap mechanism concessions, lifetime consumer price indexed income payments, income payments to surviving spouse for their life, Transfer Balance Cap concessions, potential tax offsets and so on.

“If the government would like all other retirees to use a different product with similar features to lifetime pensions and annuities, it will need to offer similar incentives,” they said.

“The current incentives offered to non-public sector workers for these products are insufficient to entice many people to swap their life savings for less income payment flexibility, loss of access to capital sums and death benefits.

“Additionally, products need to address issues which the evidence shows are the largest uncertainties retirees for late in retirement: aged care, healthcare and emergency expenditure costs.”

The two accounting bodies said the question of defaulting members into retirement income products that prioritise longevity “needs to be conducted with extreme care”.

“Current longevity products are very often future legacy products, and locking members into specific providers for decades with no escape, either through withdrawals or rollovers, is controversial,” they said.

We do not support the creation of so-called standardised products as mentioned on page 24 of the Discussion Paper without additional government provided incentives that we have mentioned above.