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Super industry mature enough for CIPRs
The superannuation industry is mature enough to deliver comprehensive income products in retirement (CIPRs), Challenger believes.
The investment management firm has called on the industry to move on from the rhetoric that the system is immature and to start looking at CIPRs at a household level.
Challenger's retirement income chairman, Jeremy Cooper, said: "What we're saying is, at least numerically, we're ready and that the industry has well and truly arrived, not in all cases but at the average and median levels".
While the industry is waiting for the Government's proposals for CIPRs, Cooper said Challenger hoped for the removal of barriers to new products for the deferred lifetime annuity market.
"We definitely want to be a participant in that. The ultimate outcome is in time the whole system will transform and super will be much less about stellar investment returns in accumulation but that's going to be subsumed by the proposition in retirement," Cooper said.
"So, new competitors, new products, and the focus being on giving you a lifetime worth of secure income in retirement is what we want whereas at the moment it's still the focus and the measure of success is very much in the accumulation phase."
Cooper said one of the biggest challenges would be how the industry framed the products.
"So what is a CIPR for? When I'm explaining it to you, what language do I use? Traditional growth inflexibility, or accumulation language, or is it going to be insurance/ risk management that kind of framework and depending on the language used typically what you find in behaviour research is that the person will engage with that frame," he said.
"Funds have to be very careful in how they frame what they're doing and there are quite a lot of different things happening.
"It will be challenging because these things are not compulsory and they don't have to choose to be in one so the value proposition piece is going to be pretty important and what's in it for me? Why don't I just have it in a bank, what use is this? It's going to be exciting and interesting to see how all this pans out."
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