Accountants urge against ‘badgering’ on super draw-downs

The major accounting groups have restated their position that self-managed superannuation funds (SMSFs) need not be exposed to the Retirement Income Covenant and that retiring super fund members should retain access to lump sums.

The accounting groups, Chartered Accountants ANZ, CPA Australia and the Institute of Public Accountants (IPA) used their joint response to Treasury’s current consultation around a Retirement Reporting Framework, to restate their position.

They said the provision of retirement incomes is a problem for funds regulated by the Australian Prudential Regulation Authority (APRA) – not SMSFs.

“SMSFs appear to provide a service that meets retirees’ needs, and we do not believe that there is presently any need for SMSFs to be subject to additional regulatory requirements in relation to retirement income streams,” their joint submission said.

Addressing the latest Treasury consultation the accounting groups not only reinforced their view on members retaining access to lump sums, but also sounded a warning on the Government or superannuation funds seeking to force the hand of retirees on minimum pension draw-downs.

“Retirees may have very valid reasons for taking the permitted minimum over extended years and should not be badgered by the Government, regulators, trustees and others into thinking they are doing something wrong,” the submission said.

The accounting groups also made reference to the relevance of the APRA superannuation performance test in circumstances where retirement products are not subject to the test.

“We note the potential for a scenario whereby an investment option, which may be prohibited from accepting new members in the accumulation phase due to failing the performance test, may have an equivalent product in the retirement phase which is still ‘open for business’,” it said.

“Since the performance of investment options in fully or partially funded retirement income options is subject to the implementation of investment strategies which themselves may be subject to the performance test in the accumulation phase, we believe that for full transparency, a soft version of the performance test could be used to provide this visibility.

“This could apply to investment options in ABPs, although we note that investment risks can apply to non-ABPs, such as where collective defined contribution plans or variable annuity-style products are used.

“We do not necessarily support prohibition in the same way it is used in the performance test, but we do believe that fund members who utilise such products should be able to see whether their product has underperformed,” the accounting groups said.