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Are CIPRs a replacement for good advice?

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CIPRs are intended to help retirees better manage the draw-down phase of their retirement savings, but financial advice will remain an important ingredient to ensuring retirees maintain the quality of life they want.

In their response to Treasury’s Retirement Income Covenant position paper, the Association of Financial Advisers (AFA) makes some good points. 

In particular, the transition from living on a salary to living on your assets for life represents a huge change.

Determining what product or products to buy at retirement is one of the most important decisions anyone will make in their lives. Getting advice from a financial adviser is a great way for people to review their options and ensure their investment decisions are 100 per cent in their best interest.

However, ASIC research tells us that people may face challenges when engaging with a financial adviser.

Issues including "cost, perceived value, lack of customer confidence to engage with financial matters and trust issues" can stop people from initiating contact with an adviser.

What this means is millions of retirees may have passively watched their superannuation shift into account-based pensions at retirement – without the input of an experienced financial adviser.


This can expose them to all the major risks in retirement: inflation risk, market risk and longevity. Many retirees then instinctively may live more frugally than necessary – presumably to avoid the risk of their assets running out in later life.

While it’s not an easy undertaking for super funds to expand the products they offer at retirement, there has already been a huge amount of work done in the area. The government has removed many impediments that prevented innovation and there are already a range of new product options for superannuation trustees to consider.

For example, funds can now provide longevity protection, with the support of actuaries and a specialist reinsurer, without taking on longevity risk themselves and without needing large capital reserves mentioned by the AFA. 

Optimum Pensions has designed its Real Lifetime Pension product to allow a fund to manage the assets themselves and offer each retiree investment choice to suit their needs and preferences – all 100 per cent reinsured from a longevity point of view.

It’s important to note CIPRs are not compulsory for members to take. 

CIPRs mean that each super fund can offer a well-designed product to suit the needs of many retiring members. 

Members who don’t wish to take up the product, including those who have received advice about a different strategy, are under no requirement to use the CIPR, but one thing we are certain of is the CIPR or post-retirement decision is one of the most important decisions you will make in your life.

We believe advice is an important part of that process, and the focus for funds should be on the provision of both the CIPR product and the accompanying advice. It’s not an either-or consideration for us.

Continuing to shine the spotlight on how important advice is to fund members, the emergence of digital advice and ‘bionic’ advice will see an expansion in the way Australians get help making financial decisions. 

Many advisers are leveraging innovations in fintech to offer new and more efficient ways for people to access advice. 

It makes sense for super funds to be aware of these options and consider offering a menu of advice options at retirement – from scaled advice to phone-based advice, to traditional face-to-face support.

David Orford is the founder and managing director of Optimum Pensions.