16 January 2019

In response to the Productivity Commission report Superannuation: Assessing Efficiency and Competitiveness, the Institute of Public Accountants (IPA) refers to its earlier views made in a submission by the IPA Deakin SME Research Centre, which reinforced the 2014 Financial Services Inquiry proposed objective that superannuation is intended ‘to provide income in retirement to substitute or supplement the Age Pension’.

“Acknowledging the purpose of the superannuation system, we need to continue the process of crafting and shaping the potential forms of the Retirement Income Covenant,” said IPA chief executive officer, Andrew Conway.

“An important part of this work includes clarifying the fiduciary relationship between trustees and the members of a retirement fund.

“Australia has $2.61 trillion in managed superfunds and this underlines the significant role that the fund trustee plays.

“Considering the interim findings of the Hayne Royal Commission, the Productivity Commission superannuation report and other inquiries, the role and accountability of trustees must be reinforced.

“Australia needs a framework which acknowledges significant funds being invested, varying levels of expertise and knowledge of trustees, along with their reliance on external experts, to provide further guidance in the Covenant to clarify the obligations of trustees.

“The IPA strongly supports the high level guidance of a Comprehensive Income Product for Retirement (CIPR) to ensure fund members have efficient and constant income, longevity risk management and some access to capital.

“However, CIPR is not appropriate for all; for example, where illness leads to shorter life expectancy or a lower super balance.

“The IPA also supports Retirement Income Covenant principles that encompass the development and existence of a retirement income strategy and facilitating engagement of fund members with decision making on their own retirement.

“Higher levels of financial literacy would also lead to higher levels of fund member engagement as recommended by the Productivity Commission; a recommendation, we strongly support,” said Mr Conway.