Executive Summary

  • We support the recommended primary objective of superannuation to provide income in retirement to substitute or supplement the Age Pension.  Enshrining this objective in legislation, and implementing the Financial System Inquiry (“FSI”) recommendation 11, will encourage the development of better comprehensive income products for retirement (“CIPR”).
  • We make specific commentary on subsidiary objectives in relation to the FSI conclusion that there are a limited range of retirement income products.
  • The subsidiary objectives our submission covers are:
     - Help people manage financial risks in retirement;
     - Be invested in the best interest of superannuation fund members maximising
        risk-adjusted returns;
    -  Be simple and efficient and provide safeguards.
  • FSI Recommendation 11 observed that CIPRs should have exposure to growth assets and that superannuation funds may work with life insurance companies, other funds or other entities to provide CIPRs.  This could include the fintech industry consistent with Government policy.
  • We explore the role of equity protected funds as a component of a CIPR.  The historical issue that always protecting your portfolio is 'expensive' can be addressed through the management of Australian Securities Exchange (“ASX”) options.  This is the key to lowering the cost, and made possible through advances in technology and deregulation.
  •  The implementation of a risk managed solution requires the following additional features:
     - Financially strong counter-party;
     - Transparent mark to market valuations;
     - Capacity to scale the product offering.
    These are aligned with the stated objectives of the Australian Stock Exchange.

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