A government-backed mandate for super funds to offer annuity-style products has been labelled “actuarial fraud” by a manager of one of Australia’s largest funds.
The mandate, that all super fund trustees offer members at least one “flagship” comprehensive income product for retirement (CIPR), is “not really a good idea”, Sunsuper national manager Ray Murray said.
A position paper put out last week by Minister for Revenue and Financial Services Kelly O’Dwyer describes CIPRs as products that provide life-long income streams.
The position paper says, “Requiring trustees to offer a CIPR to members would provide a better starting point at retirement and assist members to achieve their retirement income objectives without needing to design their own product.
“Trustees may choose to offer additional products at the time of offering the CIPR, but it should be clear that the flagship CIPR offering is the starting point for members.”
However, to Mr Murray, the fact that trustees are required at the very least to facilitate the implementation of a CIPR implies problems with the products and constitutes “actuarial fraud”.
Speaking during the Actuaries Institute’s Financial Services Forum on Monday, he said, “I do not see the demand; I do not see the members wanting to do this. Funds will spend a lot of money developing something which will have no demand and no people will participate in it.
“Why, if these are such a good idea, is compulsion involved? If they're a good idea, they'll be bought in the marketplace by the funds, so why force funds to go down something?”
However, Treasury’s principal retirement income policy adviser, Darren Kennedy, noted there is no explicit compulsion for funds to take up the products, rather for them to at least facilitate the implementation via third-party providers.
He said, “One of the feedbacks the government received through that consultation process was that really, if you want to affect change, you need to make that requirement compulsory for funds to offer.
“It's still a valid question and it's one of the tensions that have been debated over the last two years as this retirement income framework has been developed.”
Update: In response to Mr Murray's comments, Sunsuper has released its "corporate position" on the products.
"Sunsuper strongly supports the work the government is doing to improve the efficiency and effectiveness of the retirement income system. We recognise that pooled longevity products can be part of the overall solution to help retirees better manage their retirement savings.
"Sunsuper will continue to conduct analysis with a view to offer our members a CIPR product in the future."
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