The reforms of retirement income streams could be the “most active disruptor” in the superannuation space in the long term and provide industry funds with significant advantages over SMSFs, according to one lawyer.
Townsends Business & Corporate Lawyers special counsel Michael Hallinan says while the superannuation industry is predominantly focused on implementing the wider super reforms at the moment, it will be “a very interesting period for advisers” when the new types of retirement income streams begin to emerge for super members.
“At the moment, the immediate thing is the new contribution rules,” Mr Hallinan said.
“The other big technical issue will be those who are moving from accumulation to the retirement phase and what kind of income stream or what combination of income stream products should they take?”
Deferred annuities will be one of the main types of annuities that will emerge in the marketplace from the government’s review of retirement income streams.
“I think deferred annuities will be on top of the list because at the moment deferred annuities are currently very unattractive because there’s no tax earnings exemption,” Mr Hallinan said.
He added that industry funds will also be keen to develop their group annuitisation products, which could pose a competitive threat to the SMSF sector.
“I think that will be the most active disruptor for the industry funds when they start developing non-standard retirement income stream products,” Mr Hallinan said.
“You won’t be able to access them through an SMSF because you need scale to make [these products] work. You need a number of people in the pool to make it work and you don’t have that in an SMSF.”
There may also be some standalone deferred annuity products available to SMSFs.
“You could see the dynamics where the industry funds could have an advantage in terms of providing income stream products against SMSFs,” Mr Hallinan said.
“They may leverage that product to entice people who are currently in SMSFs to move their entire balances into an industry fund where they can provide an SMSF-like experience. That might be five years down the track but that’s really going to be the most interesting long-term change out of these various changes.”
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