The Federal Government needs to clarify Age Pension means testing rules to better enable the development of retirement income products, according to the Association of Superannuation Funds of Australia (ASFA).
The ASFA used a submission to the Senate Economics Legislation Committee review of the Government legislation underpinning the new retirement income products regime to point to the current lack of clarity.
It said that the intention to remove the tax barriers and encourage a wider range of innovative retirement income stream products was first announced in the 2016/17 Budget and there was a need to have the supporting legislative changes in place as soon as possible.
It said the means test changes contained int eh current legislation were the final step required, in circumstances where clarity of treatment of such products was required before they could come to market.
“Current means testing rules are unclear in regard to their application to a range of innovative products with certain existing and potential new product types appearing to fall outside the scope of current means test rules,” the submission said.
“Age Pension eligibility and the amount of Age Pension that is paid both initially and over time are critical inputs into retirement financial decision making,” it said. “While a variety of approaches are possible, ASFA considers that the new means testing rules have arrived at an appropriate trade-off between simplicity and neutrality in application to different types of retirement income products.”
It said that the changes contained in the legislation were prospective and would not lead to any adverse outcomes for people currently receiving payments from annuities and similar financial products and that to delay the passage of the legislation during the next parliamentary sitting would likely result in a pushback of the start date for the new means test rules.