The Association of Superannuation Funds of Australia (ASFA) has called for amendments to Superannuation Industry (Supervision) (SIS) regulation, allowing SMSF trustees to purchase deferred annuities.
In its paper Changes to regulatory settings for financial products dealing with longevity, ASFA yesterday recommended changes to “regulatory impediments” to retirement income stream products to address the financial consequences of longevity.
Current SIS provisions only allow individuals to purchase annuities and similar products, but ASFA has said SMSFs should also be permitted to purchase these products.
“There should be consistency, such that SMSFs can invest in deferred annuities and like products,” said ASFA chief executive Ross Clare.
“An individual should be able to manage their retirement income needs through a single vehicle, which is a single superannuation fund … employer, industry or SMSF.
“A fund, including an SMSF, should be able to purchase a deferred annuity and have the same tax and social security treatment for its clients, as would have occurred if it had been purchased directly.”
Current SIS regulations are heavily focused on post-retirement products that are presently in the market, ASFA stated, limiting the scope for innovation and new products.
The risk of longevity is a significant issue for SMSF trustees, with Challenger’s Jeremy Cooper previously telling SMSF Adviser it’s reasonable to expect trustees will live longer than the general population.
“Because nearly 70 per cent of SMSFs are to the benefit of two members, their pool of savings will need to last even longer. Although SMSFs have higher account balances than other super accounts, they might also need to last longer due to members’ greater longevity,” he said.
Mr Cooper also said deferred lifetime annuities (DLAs) although not currently offered in Australia, will also form part of future strategies to hedge longevity risk.
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
- 26 May 2017Merged association poised to shake up member servicesBy Katarina Taurian
- 26 May 2017Positive exclusion as LRBA amendments introduced to ParliamentBy Miranda Brownlee
- 26 May 2017Midwinter releases superannuation calculatorsBy Staff Reporter
- 26 May 2017AMP pushes SMSF arm in broad growth strategyBy Staff Reporter
- 25 May 2017SMSF member bodies confirm mergerBy Katarina Taurian
- 24 May 2017SMSF loans facing ‘double whammy’, says brokerBy Miranda Brownlee
- view all
- Merged association poised to shake up member services
Under the united banner of SISFA, two newly merged representative bodies are looking to provide “unique” member benefits, including faci...read more
- Positive exclusion as LRBA amendments introduced to Parliament
The government yesterday introduced its proposed amendments for limited recourse borrowing arrangements into Parliament, but has not include...read more
- view all