Tax system crippling retirement product innovation: ASFA
Current tax rules around retirement products are increasingly impinging on the flexibility of retirees, the Association of Superannuation Funds of Australia says.
The regulatory burden of getting a new product on the market, coupled with tax structures, is limiting consumer choice in the post-retirement space, particularly for those who want to manage longevity risk, ASFA CEO Pauline Vamos said.
“We have a number of impediments that we need to remove in terms of post-retirement,” she said.
“You’ve got to deal with about four different regulators to get a post-retirement product through. The capital product requirements are very high. There isn’t a financial advice framework. The tax structures for deferred annuities are laughable.”
She said the tax treatment of deferred lifetime annuities in particular should be addressed, in the interest of consumer choice.
“All it does is it gives people a choice. You can put some of your money in a deferred life annuity so you’ve got that longevity risk managed. You don’t have to put all of your money into it,” she said.
Nonetheless, Vamos said she has confidence these issues will be ironed out in the short to medium term.
“I think that the Government has a real commitment, it’s going to be part of the Financial Systems Inquiry, it’s going to be part of the tax green paper, so I think finally we will have a real conversation on it.”
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