Treasury hands down verdict on retirement income products
The Treasury has released the final report of its retirement income streams review, addressing how SMSFs and small APRA funds would operate under a new set of rules for retirement income products.
The Treasury's Retirement Income Streams Review, released last week, recommended an additional set of income stream rules should be developed to allow lifetime products to qualify for the earnings tax exemption, provided they meet a declining capital access schedule.
According to the report, the alternative product rules should be designed to accommodate purchase via multiple premiums, but additions to existing income stream products should continue to be prohibited.
However, the Treasury said SMSFs and small APRA funds should not be eligible to offer products under the new rules.
“As SMSFs and small APRA funds do not have significant numbers of members, the advantages of pooling to provide greater longevity risk protection are not available,” the review stated.
“As such the review concluded that SMSFs and small APRA funds should not be eligible to offer products under the new rules. Members would, [however], still be able to purchase such products from other providers,” the review said.
It also found that the minimum drawdown rules for account-based pensions are "about right".
The current minimum drawdown rate for people under 65 is four per cent, five per cent for those aged 65-74 and then steadily higher for older retirees.
The Treasury endorsed the current rules while recommending they be regularly reviewed by the Australian Government Actuary.