Comments invited on proposed retirement income product disclosure

By Geoff Sanders
Financial Services Superannuation

In brief

Written by Partner Geoff Sanders and Associate Philip Marquet

Treasury has released a consultation paper on a new proposed simple, standardised product disclosure document, as part of the Federal Government's framework for Comprehensive Income Products for Retirement. The proposed new disclosure document will sit alongside existing PDS requirements.


As has been widely discussed (see our Client Update: A framework for CIPRs or just more work for super trustees? and Unravelled: CIPRs – some interesting findings, the Government is seeking to develop a framework for more efficient retirement income products, based on recommendations from the Financial System Inquiry. 'Comprehensive Income Products for Retirement' (CIPRs) are intended to be high-standard, mass-customised products that provide a balance of income, risk management and flexibility.

As part of this framework, the 2018-19 Federal Budget proposed:

  • a number of changes to the pension means test rules, to encourage the development of CIPRs by superannuation trustees and their uptake by members; and
  • a new 'retirement income covenant' to be included in the Superannuation Industry Supervision Act 1993 (Cth) (the SIS Act), which would require superannuation trustees to formulate a retirement income strategy for fund members.

As the next stage of the reforms, Treasury has released the 'Retirement Income Disclosure Consultation Paper' (the Consultation Paper) seeking feedback on a proposed simple, standardised 'retirement income fact sheet' (the Fact Sheet) that will allow members to easily find and compare key information about each CIPR.

The Fact Sheet

The Consultation Paper is premised on the (not unreasonable but nonetheless remarkable) conclusion that product disclosure statements (PDS) do not generally provide useful or readily comparable information to assist members to make decisions about whether a financial product is suitable for them. However, Treasury's response to this problem is not a particularly ambitious one – it's clear that the Government is not proposing to amend the PDS regime more generally, nor to remove or modify the PDS requirement as it applies to CIPRs.

Instead, the Consultation Paper proposes to retain the existing PDS requirements (with all their acknowledged deficiencies), and to impose an additional obligation upon superannuation trustees to produce a stand-alone Fact Sheet for the CIPR (or CIPRs) they offer.

A primary purpose of the Fact Sheet is to demonstrate clearly the trade-offs between income, flexibility and risk management that inherently apply to all CIPRs, so that members can easily find and compare this information as between different CIPRs. Treasury's view is that the existing PDS regime does not facilitate explicit disclosure of these trade-offs (although it is not clear why a stand-alone Fact Sheet is preferable to amendment of the existing PDS requirements).

The Consultation Paper proposes that the Fact Sheet will include standardised information about the following metrics:

  • the level of periodic income per $100,000 of purchase price that the CIPR is expected to provide each year to age 97 (to be presented numerically and graphically, net of fees and taxes);
  • a measure of potential income variation, presented as a score on a scale of one to seven (with higher scores indicating more stable and reliable expected income) and an income shape graph showing best, average and worst outcomes over the member's life;
  • the maximum amount that the member could withdraw from the CIPR at any time if they decide to stop using the product (either as a graph or a table showing how much of the original purchase price is available as a lump sum at various stages of the member's life); and
  • information about any amounts available to be paid to a spouse or partner after the CIPR holder's death, including the remaining cash balance available for withdrawal upon the member's death and any lump sum death benefits payable in connection with the product.

The Consultation Paper is accompanied by a Technical Paper prepared by the Australian Government Actuary, which sets out the proposed calculation methods that will underlie the determination of the income variation measurements (although this methodology is merely for illustrative purposes, and does not incorporate a full range of asset classes).

What's next

Following the consultation period (see below) and consumer testing of the proposed Fact Sheet design, future developments flagged in the Consultation Paper include:

  • requiring superannuation trustees to undertake early (and lifelong) two-way engagement with members, so that members have a greater understanding of retirement products, and to enable trustees to tailor such products more appropriately;
  • a requirement (or perhaps an expectation) that superannuation trustees will provide 'age appropriate information' to members over the life of the CIPR;
  • legislative reform to clarify the interaction between the CIPR disclosure framework and the existing financial advice regime (a problem that we have previously raised, and will be particularly important, given that the above requirements sound very much like the provision of personal advice to members);
  • development of regulatory reporting requirements (including for the purposes of populating an industry-wide CIPR comparison tool);
  • an expectation that superannuation trustees will start to provide intra-fund product comparison information about each CIPR offered within a fund; and
  • further consultation on the details of the income variation measurement methodology, which will include a broader range of asset classes.


The closing date for submissions is 28 March 2019.