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Post-retirement product innovation inhibited
Until there is legislation supporting default retirement products, product innovation in the area is likely to be curtailed, according to Rice Warner's assessment of the landscape in the wake of the final report of the Financial Systems Inquiry (FSI).
The assessment pointed out that superannuation had been the subject of annual legislative changes for more than 30 years and the industry was still bedding down the Stronger Super initiatives.
"Consequently, trustees and management will not relish further change. Nonetheless, the criticism of costs and the lack of suitable retirement solutions need to be addressed," it said.
The analysis said the Inquiry had found that the cost structure of the industry was too high and needed to be reduced.
"This should be a key objective of all superannuation funds, but it will need to be managed against ongoing pressure to deliver more services to members," it said.
The analysis said most funds were already contemplating better retirement solutions and the Inquiry's guidance was likely to be useful.
"However, until there is legislation for a default retirement product, product innovation is likely to be curtailed. Consequently, funds will need to focus on providing advice to members approaching retirement," it said.
"Funds which can engage members in a cost-effective manner and shift communications from lump sums at the point of retirement to a pension income through retirement, will be able to meet their core objective of delivering better outcomes for their members," the Rice Warner analysis said.
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