Challenger Limited has run counter to both the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) in backing Federal Treasury proposals for the introduction of a retirement income covenant and comprehensive income products in retirement (CIPRs) largely based on annuities.
While both the FPA and the AFA have argued against a one-size-fits-all approach and suggested that a covenant will not trump the delivery of good advice, Challenger has argued that the superannuation system is not yet up to delivering on the next phase – retirement.
“Challenger supports a Treasury proposal to introduce a covenant in the superannuation laws to ensure the legislative arrangements for the retirement phase of super keep pace with the size and importance of the system,” the company said.
“It backs the approach of developing the covenant ahead of the other regulatory measures needed to implement the retirement income framework because setting appropriate standards that place emphasis on the needs of members in retirement is a critical first step.”
Challenger said the Treasury proposal that superannuation funds assist older members by developing a retirement income strategy for the fund would plug a significant gap in the Superannuation Industry (Supervision) Act because, currently, retiring members do not have the benefit of such a provision and neither do fund trustees.
Challenger’s chairman, Retirement Income, Jeremy Cooper said that the CIPR proposal was not a revolutionary change, but a necessary enhancement for a system that will have $1.3 trillion heading toward retirement by 2030.
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