Australia is often acknowledged as having a world-class retirement savings system and the Government has now turned its attention to developing a world-class retirement income system. In doing so, it has agreed to support the development of CIPR and recently released a discussion paper for review. The discussion paper explores the key issues in developing a framework for the retirement phase of the superannuation system, by allowing trustees to offer CIPR to their members. The Government feels that this reform – and the corresponding products – is critical to lift the standards of living and choices of Australians, and to ensure that policy settings are right for a mature superannuation system of the future.
Why is this an important time to be implementing policy? As we are all aware, Australia’s population is ageing, and pleasingly, we are among those enjoying the longest life expectancies in the world. By 2054-2055, the number of Australians aged 65 and over will more than double and one in every 1,000 people will be aged over 100. Therefore, now is the time for Government and trustees to be laying the foundations to ensure our settings are right for the retirement phase of our superannuation system.
Those at the point of retirement currently face complex decisions at retirement and there is limited take-up of products that can assist these individuals in effectively managing the risks they may face in retirement. In particular, the risk of outliving their savings. The Government’s framework seeks to address these problems, which we have addressed in a corresponding white paper. These problems include:
- self-insuring against longevity risk
- inefficiency due to an over-reliance on account-based pensions
- lack of diversity and choice
- complex financial decisions and a lack of guidance.
As well as responding to these issues in our white paper, we have also highlighted the important social and psychological dimensions involved in retirement, which should be considered within the scope of the proposed CIPR framework.
Download our white paper to read more about CIPR and our recommendations and proven alternative methods – including Collective Defined Contribution schemes.
If you have any questions about CIPR, please contact us.