The Federal Treasury is guilty of having allowed Comprehensive Income Products in Retirement (CIPRs) to become a “cargo cult” capable of forcing superannuation fund trustees not to act in the best interests of members, according to the Australian Institute of Superannuation Trustees (AIST).
The industry funds representative body, on this basis, urged the Federal Government against rushing ahead with the implementation of the legislation intended to underpin post-retirement products in circumstances where outstanding gaps in consumer superannuation disclosure and protections are yet to be resolved.
The AIST used its pre-Budget submission to warn that despite the fact a considerable amount of work has been done to allow for the introduction of CIPRs it had serious concerns that “this project has become something of a cargo cult, to the extent that Treasury has prioritised these products as a panacea to all problems facing all retirees”.
“This approach is fraught with danger, and the present position occupied by Government would see trustees required to mandate CIPRs for their members including in situations where the trustee suspects that this will not be in the members’ best interests,” the submission said.
“Proposals forming part of the Government’s position in relation to fixing this issue revolve around the creation of a ‘safe harbour’ which, whilst protecting trustees from breaches of either the trustees’ or advisers’ best interest duties prescribed in law, would also protect unscrupulous issuers of poorly designed products,” it said.
The AIST submission urged the deferral of the CIPR legislation until consumer protections can be better put in place.
“In the absence of these consumer protections which, at the very least, must include sufficient consumer disclosure to enable fund members to have informed consent when selecting these products, the Productivity Commission’s recommendations and the lack of an overall direction in relation to retirement income policy, we recommend that this measure be deferred,” it said.
