On 3 may 2016, the Government released the final report of its Review of retirement income stream regulation, together with its response to the review, which was to accept all 7 recommendations.
[LTN 84, 4/5/16]
Government’s 2013 election and subsequent commitments
The Government’s superannuation 2013 election commitments included reviewing:
- the regulatory barriers restricting the availability of relevant and appropriate income stream products in the Australian market; and
- the minimum payment amounts for account-based pensions, to assess their appropriateness in light of current financial market conditions.
Given their interactions, this discussion paper Review of retirement income stream regulation forms the basis for consultation on both reviews.
In addition, on 14 December 2013, the Government announced it would not proceed with the previous government’s unlegislated measure to facilitate the provision of deferred lifetime annuities and that it would instead consider the proposal as part of the review of the regulatory arrangements for retirement income streams. This paper also provides a basis for consultation on extending concessional tax treatment to deferred lifetime annuities.
[Treasury website for Discussion Paper] [Discussion Paper]
Government’s 2014 Discussion Paper
On 21 July 2014, the Government released a discussion paper, Review of retirement income stream regulation for consultation in line with its 2013 election commitments to review:
- regulatory barriers restricting the availability of relevant and appropriate retirement income stream products in the Australian market; and
- the minimum annual drawdown amounts for account‑based superannuation income streams.
[Treasury website for Review Report]
The Review’s Recommendations
The Review made the following recommendations.
In regard to the existing minimum drawdown rules:
- The current annual minimum drawdown requirements are consistent with the objective of the superannuation system to provide income in retirement and should be maintained.
- The Australian Government Actuary should be asked to undertake a review of the annual minimum drawdown rates every five years and advise the Government to ensure that they remain appropriate in light of any increases in life expectancy.
- Any other changes to the minimum drawdown amounts should only be considered in the event of significant economic shocks and based on further advice from the Australian Government Actuary.
In regard to the development of other annuity-style retirement income stream products:
- An additional set of income stream rules should be developed which would allow lifetime products to qualify for the earnings tax exemption provided they meet a declining capital access schedule.
- 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.
- Self-Managed Superannuation Funds (SMSFs) and small Australian Prudential Regulation Authority (APRA) funds should not be eligible to offer products in the new category.
- A coordinated process should be implemented to streamline administrative dealings with multiple government agencies.
[Review’s Report]