The Financial Planning Association (FPA) has warned the Federal Government that its push towards a “retirement covenant” via comprehensive income products in retirement (CIPRs) risks blurring the lines between products sales and advice and runs contrary to minimising consumer risk.
The FPA has strongly criticised the Federal Treasury for seeking to progress the implementation of a “retirement covenant” and CIPRs amid what it describes as “shocking evidence” uncovered by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
“Treasury’s proposed Retirement Income Framework is forcing the creation of financial products, mandating they be offered to consumers, overriding existing consumer protection mechanisms, and overlooking the significant risk this poses for consumers and the trillions of dollars of Australians’ retirement savings,” the FPA said.
“It is also ignoring the fact that if these products were viable, product providers would already be offering them to consumers,” it said. “However, as detailed in our previous submission, product providers have not developed these type of products, or if they have they have failed and become legacy products to the detriment of providers and consumers.”
In a submission responding to the Treasury’s Retirement Income Covenant Position Paper, the FPA has left the Government in no doubt of its position, arguing that the moves towards a CIPR regime are contrary to the activities of both the Royal Commission and the Productivity Commission and should be put on hold and, for preference, scrapped.
“FPA strongly opposes the introduction of such a regime as we believe it would be detrimental to consumers and would erode consumer protections, particularly in relation to the selling of financial products and the provision of financial advice,” the FPA submission said. “This will only serve to confuse consumers and blur the lines of advice and product sales.”
“These are significant issues for consumers that the Government is working tirelessly to address in other areas,” it said. “It is extremely disappointing and concerning to see Treasury progressing with the introduction of this regime at a time when shocking evidence has been, and continues to be, disclosed at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, with its public hearings and inquiry into the superannuation industry still pending.”
“Progressing the development of this Comprehensive Income Products in Retirement (CIPRs) regime at this time undermines the seriousness and role of both the Royal Commission and the Productivity Commission’s Inquiry,” the FPA submission said. “We do not believe it is appropriate for a retirement income product regime that encourages a sales-based culture to be introduced, or further developed and consulted on, prior to the completion of the Royal Commission or the Productivity Commission’s work.”
“The FPA strongly recommends the Government, at a minimum, put this project on hold at this time,” it said. “However, we believe this regime should not be implemented at all.”
