In its submission to the ‘Review of retirement income stream regulation’, the Association of Superannuation Funds of Australia (ASFA) has outlined five principles under which it believes the retirement income system should be designed to ensure it delivers on both its fiscal and social objectives.
ASFA CEO Ms Pauline Vamos says as a starting point, the system should have measurable goals that are agreed to and monitored.
“This will guide policymakers towards decisions about how to adjust the system to accommodate the changing nature of Australia’s population, and also give the community, governments and the industry a yardstick against which they can measure its success.”
The second principle ASFA recommends is to take a ‘whole-of-life’ approach to superannuation and retirement, in order to make the system simple, easy to navigate and to allow for continuity and stability in retirement planning.
“This includes streamlining the process from moving from accumulation to drawdown, developing products that have greater flexibility in their design and encouraging people to take an income stream that stretches across the whole of their retirement. For people who are largely disengaged with their super, this could be in the form of a default ‘MyPension’, which offers an allocated pension alongside the option to invest in a product that offers longevity protection.”
The retirement income system should also be integrated with, and consistent with, other interdependent government policies.
“Innovation is more likely to occur if there is a unified approach to the regulation of retirement income products across the relevant government departments,” says Ms Vamos.
In order to allow innovation to flourish, regulation should be structured around principles rather than specific product features.
“Retirement products in the future will likely be a combination of income streams, account management and longevity protection, and may be part of pooled products or individually managed accounts. This is why it’s crucial that regulation is framed to accommodate innovation in product design that reflects the objective of providing regular incomes streams over retirement, rather than specifying detailed product features.”
Finally, the retirement income system must be supported by an appropriate consumer protection framework.
“This framework should include a safe default for individuals who do not exercise choice, disclosure and benchmarks that allow people to compare products, as well as access to advisory services and tools that enable consumers to ensure their retirement strategy and product is fit for their own individual circumstances.” Ms Vamos concluded.
For a copy of the full submission, click here.