Financial advisers have role in proposed MyRetirement regime

Financial advisers may become key facilitators in the delivery of Comprehensive Income Products for Retirement (CIPRs) under the Government's proposed new MyRetirement regime.

The Minister for Revenue and Financial Services, Kelly O'Dwyer has released the Treasury discussion paper intended to underpin development of the so-called "MyRetirment" regime, which points to superannuation funds providing the major delivery mechanism backed by product providers such as insurers.

Outlining the type of environment within which the regime would operate, the discussion paper said that as well as superannuation funds delivering MyRetirement products, as is currently the case, trustees and other product providers such as life insurers could also create new retirement income products that are tailored to particular member segments or individuals, rather than to the majority of the membership.

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"These products could be offered via personal financial advice (including through robo-advice) where the adviser is required to consider the individual's circumstances and needs," it said.

"Individuals could also purchase these products via direct channels. If these products are certified to meet the proposed minimum product requirements of a CIPR, it may be appropriate to allow a label to be attached indicating that the product ‘meets the minimum product requirements of a CIPR'," the discussion paper said.

Announcing the release of the discussion paper, O'Dwyer said the creation of MyRetirement products represented an important reform that would help lift the living standards and choices of older Australians.

"There are seldom other reforms that offer such large potential increases in income, without a cost to taxpayers," she said.

"The potential gains to retirees, the economy and taxpayers from the introduction of MyRetirement products are significant," O'Dwyer said. "For retirees, the Murray Inquiry noted that incomes from more innovative retirement income products could be 15 to 30 per cent higher than those from the current typical strategy of drawing the minimum amount from an account-based pension. MyRetirement products would also provide security of income for life — often at a time people feel most vulnerable."

She said the Government would facilitate trustees offering MyRetirement products to provide an anchor to help guide individuals in their retirement income decision-making.

"Importantly, individuals won't be forced to take up these products. They will simply have a broader range of choices in how they want to support themselves in their retirement," the minister said.

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For the naive out there; there is no magic pudding that suddenly generates an extra 15-30% in income. That money comes from the inheritance you would otherwise leave to your family. Australians have typically hated annuities for that reason, but if you talk about it as a lift in pension income, the Baby Boomers are likely to swallow it up with glee. Just ask Challenger. And if these new products only make marginal sense if you also factor in a lift in Aged pension rates ala Challengers (1.9% IRR) deals, then the Australian Tax payer is funding the extra income too - another excellent outcome for the country.

I agree entirely. And with all these annuities locked at such low rates over the last few years, all the upside goes to the corporate and the liability to the tax payer, as interest rates rise. They are a poor outcome but easily sold. Lock in the adviser 'service' fee on each, and we are back to the good old locked in recurring revenue streams of the trail commission days - happy days!

Maybe Kelly can get some "4 day" planners to sell them for her, after all we cant have product bias can we, oh actually this is exactly what Kelly is pushing! Tut Tut advice needs to be in the clients best interests remember, not the governments.

For the person in the right Age Pension zone, the low rate of return on the annuity is effectively lifted by the Age Pension increase over time, and quite a long time. I remember this about a decade ago, worked well till the assets test shading changed. Now they will work again. Considering the propensity to change the rules the term "legislative risk: probably needs to be the key point of an SOA.

For the majority of retirees, not worth the downsides.

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