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In its superannuation policy for the 2013 election, the Government stated that it would review both the minimum withdrawal amounts for account-based pensions and the regulatory barriers currently restricting ‘the availability of relevant and appropriate income stream products in the Australian market’.
The then Acting Assistant Treasurer released a discussion paper, Review of retirement income stream regulation, for consultation on 21 July 2014. There were 47 submissions from individuals, industry associations, superannuation funds and professional services firms.
Treasury met with a range of industry stakeholders on a number of occasions to discuss issues raised by the discussion paper.
Treasury subsequently developed proposals to address issues raised during consultation for the Government’s consideration. These proposals were circulated in February 2015 to those stakeholders who had made a submission in response to the original discussion paper. Treasury received a further 22 submissions and conducted further consultation to refine the proposals.
Further targeted consultation on the detailed design of the proposed approach was conducted in May and August 2015. A further 13 submissions were received.
• Consistent with the objective of the superannuation system to provide income in retirement, the minimum drawdown rules work well for account-based pensions and the current minimum drawdown rates are about right.
• However, to ensure the minimum drawdown requirements continue to remain appropriate in future, they should be regularly reviewed by the Australian Government Actuary.
• The existing regulatory framework for retirement income stream products is, however, a barrier to the development of other annuity-style products that could help individuals better manage the risk of outliving their retirement savings.
• Existing barriers could be addressed through the introduction of an additional alternative set of rules that would require diminishing access to capital underpinning the product, either via commutation or death benefit.
• The alternative product rules should be designed to accommodate purchase via multiple premiums, but additions to existing income stream products should continue to be prohibited.
• A coordinated administrative process across various government agencies would assist product providers seeking to launch new products.