Submission to The Treasury on Development of the framework for Comprehensive Income Products for Retirement (CIPRs)

COTA Australia welcomes the opportunity to contribute to the Treasury consultation on Development of the Framework for Comprehensive Income Products for Retirement (CIPRs).

We have had several lengthy discussions with the Treasury team working on CIPRs during the consultation period. This brief submission essentially summarizes the views we put to the Treasury team during meetings at which detailed notes were taken by Treasury. Given our limited resources and the spread of submissions required of COTA across a wide range of government and parliamentary inquiries and portfolio areas a more lengthy and detailed submission was not feasible.

COTA Australia also commented on the related DSS Discussion Paper on approaches to the means testing of CIPRs. Our submission to that process can be found at:

To date, the Australian superannuation system has offered a limited range of retirement income stream products; usually constrained to a choice of an account-based pension or, more rarely, an annuity. COTA has long argued that tax, regulatory and other impediments to the availability of a broader range of products need to be removed or reset to allow and indeed encourage innovation, better financial outcomes and greater consumer choice. We welcomed the call made by the Financial Systems Inquiry (the Murray Inquiry) for greater options to combine products for individuals to achieve their desired levels of income, risk management and flexibility.

From COTA’s perspective the development of a strong market in CIPRs is vitally important for a range of reasons, including:

  • the need for public policy to reinforce that superannuation is designed to assist people achieve a higher level of income across their retirement for a better standard of living than if they were solely reliant on the age pension;
  • the need to encourage more people to primarily utilise their superannuation as retirement income and not retain substantial portions of it as capital right through to their death;
  • the public policy interest in a larger group of people in retirement / later years being able to meet a higher proportion of their aged care costs in a more robust user contributions regime;
  • the public policy interest in retirees having a higher income across their retirement years and therefore drawing less income from the age pension; and
  • the public policy interest and personal value inherent in superannuation enabling people to have more choice and control during their retirement over matters such as their health services, aged care and housing, which a higher income makes more possible.

CIPR Framework

COTA recognises the complexity involved in the regulation of superannuation in general and CIPRs in particular, and we strongly support the development of a clear, straightforward policy framework to ensure consumer protection and the realisation of potential benefits offered by new retirement income products.

COTA’s primary concern in the development and implementation of a CIPR framework is to safeguard the rights and needs of consumers. The following is a list of key framework features COTA believes necessary to ensure good outcomes for consumers:


  1. Policy settings should encourage retirees to positively consider CIPRs unless their situation is such that they would not benefit (e.g. life-limiting illness or income needs already met from non-super sources- refer p13 of the Discussion Paper).
  2. In particular, CIPRs should contain risk-pooling features to which current evidence and research indicates there is some resistance; therefore, government should create a modest but significant enough financial incentive for their take-up, given the public policy benefits in them becoming more widely used. In COTA’s view this does not constitute the framework “encourage(ing) annuities over other products” (p7 of the Discussion paper) but of levelling the playing field for sound policy reasons, especially until the retirement income culture changes.
  3. Superannuation Funds should be able to and indeed encouraged to offer more than one CIPR if their membership has different segments with varied characteristics and needs. Allowing them to only offer one product aimed at “the majority of members in the fund” (p21 of the Discussion Paper)could result in a “lowest common denominator” product that can be argued as satisfying most common needs, but in fact misses the mark that two different products would have hit for different member segments.
  4. CIPR design and promotion should recognize and provide for the likelihood of the need to access aged care support at home through a Home Care Package while still living in their home and requiring consumer co-contribution, as well as the probability of needing to access residential aged care at some time unless death intervenes; and obviously so for many of the people who exceed median life expectancy. His relates to proposed Requirement (c) on p16 of the Discussion Paper and should be specifically referenced as a potential need. As indeed should funding a significant health treatment such as a joint replacement as an alternative option to paying private health insurance.
  5. CIPRs are consumer financial products and should be regulated by ASIC, given its consumer protection role and forthcoming product intervention powers. ASIC is the most appropriate regulator. COTA does not support not having regulatory agency oversight given the lack of a consumer focused and co-design culture in the financial services industry, including the superannuation sector.
    (This does not prevent ASIC taking a ‘light touch’ approach to CIPR regulation; for example, authorising third party certification and/or only taking a ‘by exception’ approach to tighter supervision.)