Robo-adviser voices concerns about Govt’s CIPR proposals

28 June 2018
| By Nicholas Grove |
image
image
expand image

While strongly supportive of the Government’s proposals overall, robo-adviser SuperEd has expressed some strong reservations about Treasury’s Retirement Income Covenant.

According to SuperEd chairman and co-founder Jeremy Duffield, there were two key questions the government failed to address in its proposals.

Firstly, Duffield asked if a member in a comprehensive income product for retirement (CIPR) would be exempt from minimum withdrawal requirements. While not explicitly stated in the paper, he said SuperEd believed this should be the case.

Secondly, Duffield asked what the trigger event for a CIPR offering would be, that is, either the member stating their intention to retire and meeting the conditions of release, or something else.

Duffield said Treasury’s proposal recommended what SuperEd believed were “workable and sensible” default retirement income solutions under the rubric of CIPRs.

However, it was concerned that the narrow bands recommended by Treasury were unrealistic as they did not adequately appreciate the volatility of investment markets through changing economic regimes likely to be encountered in a retirement spanning 20 to 40 years.

"The requirement to have an expectation that the constant income stream will endure until age 105 also encourages conservative payout streams, which is not consistent with the intent to facilitate higher income drawdowns and to avoid legacy benefits," Duffield said.

"More generally, we are concerned about whether realistic expectations are being created for CIPRs, particularly in the current low interest rate/expected return environment, which makes providing high sustainable retirement incomes very challenging."

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

11 months ago
Kevin Gorman

Super director remuneration ...

11 months 1 week ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

11 months 1 week ago

Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Co...

1 day 13 hours ago

Demand from institutional investors was the main driver of growth in Australia’s responsible investment (RI) market in 2023, as the industry continued to gain momentum....

1 day 13 hours ago

In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges....

1 day 14 hours ago