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.
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