Principle 7: Offering an alternative retirement income product through advice Naturally, we support this principle. There should be little need for additional regulations and guidance, as this is already addressed via existing guidelines and standards within FOFA and related measures. Principle 8: Exception for individuals for whom are unsuitable We support the principle of enabling trustees to identify exceptions. We also support the inclusion of the two cases listed, but we believe the principle should be wide enough to enable trustees to identify other unforeseen cases that may be relevant to their own membership. The use of a $50,000 account balance as the threshold for suitability may not be appropriate for all members. The threshold may vary by occupation or personal wealth, among other things, and does not presumably take into account multiple account balances (which the trustee may not be aware of). We suggest reference here to balance’ accounts, with trustees able to undertake their own assessments of suitability given the ‘low characteristics of their members. Other comments Given the variety of ages and patterns, trustees may require guidance regarding an appropriate time ‘retirement’ (e.g. by age) to commence communicating with members regarding these types of products. Appendix A is a good example of the difficulty of communicating product differences. In each scenario, the consumer would also need to understand the projected capital value of each product before assessing whether the trade-off between income and capital is optimal for their purpose. A simple statement of income might mislead a consumer into selecting the product that produces the highest income. In cases where the retiree might need a capital asset for (e.g.) later transfer into Aged Care, this might outweigh the desire for higher short-term income.
Principle 7: Offering an alternative retirement income product through advice Naturally, we support this principle. There should be little need for additional regulations and guidance, as this is already addressed via existing guidelines and standards within FOFA and related measures. Principle 8: Exception for individuals for whom are unsuitable We support the principle of enabling trustees to identify exceptions. We also support the inclusion of the two cases listed, but we believe the principle should be wide enough to enable trustees to identify other unforeseen cases that may be relevant to their own membership. The use of a $50,000 account balance as the threshold for suitability may not be appropriate for all members. The threshold may vary by occupation or personal wealth, among other things, and does not presumably take into account multiple account balances (which the trustee may not be aware of). We suggest reference here to ‘low balance’ accounts, with trustees able to undertake their own assessments of suitability given the characteristics of their members. Other comments Given the variety of ‘retirement’ ages and patterns, trustees may require guidance regarding an appropriate time (e.g. by age) to commence communicating with members regarding these types of products. Appendix A is a good example of the difficulty of communicating product differences. In each scenario, the consumer would also need to understand the projected capital value of each product before assessing whether the trade-off between income and capital is optimal for their purpose. A simple statement of income might mislead a consumer into selecting the product that produces the highest income. In cases where the retiree might need a capital asset for (e.g.) later transfer into Aged Care, this might outweigh the desire for higher short-term income.
c2018-t285219-SuperRatings.docx