ASFA calls on government to amend account-based income streams
The Association of Superannuation Funds Australia has called on the government to allow individuals to top up existing account-based income streams rather than being required to close an account and start up a new income stream.
In its pre-budget submission to Treasury, ASFA said “Innovation in regard to superannuation products in the retirement phase should be supported by appropriate government programs and policy settings”.
There are currently around 700,000 Australians aged 65 and over who hold accumulation super accounts.
The submission said the take-up of super products protecting the financial costs of longevity has been “modest to date” and there are a substantial number of individuals who have super who remain in the accumulation phase even though they qualify for taking up a retirement income stream.
The Class Benchmark 2023 report highlighted that APRA funds had only 49 per cent of members who had moved into the retirement phase compared to nearly 88 per cent of SMSFs.
The ASFA submission noted that “the overall cost and complexity of superannuation arrangements would be reduced by allowing individuals to make contributions to an account in pension phase”.
“Such a change would be administratively simple for funds, especially compared to the current requirement for a member to close a pension account and then start a new account if they want to top up their pension account,” it continued.
It added several steps could be taken in the short term to assist funds in delivering enhanced retirement income options to fund members including providing regulatory relief for super funds to provide calculators and retirement projections for account balances in the retirement phase and to allow the comparison of various types of retirement income products.
The submission also noted regulatory impediments to offering retirement products flowing from limitations of ASIC’s legislative relief for super calculators and retirement estimates.
It said legislative relief from substantial requirements regarding the provision of financial advice does not apply to estimates and calculator results provided to those already in retirement, and estimates and calculator results concerning specific rather than generic products.
“The ASIC relief also requires calculators and estimates to assume that the age pension will substantially increase over the course of retirement, which downplays the need for financial protection against the impact of longevity,” it said.
“Recasting of the current legislative relief to also deal with retirement income products would assist fund members in determining whether such a product is suitable for them. It would also support the offering of such products by funds.”
ASFA added that offering suitable products by funds would also be assisted by the preparation and publication by Treasury of relatively recent data on retirees generally and for specific cohorts.
“Such information also would better inform policy debate and would assist funds to meet their obligations under the Retirement Income Covenant. Central publication would be less expensive and more consistent than having each fund preparing its own data on retiree cohorts,” it said.