Government pushes ahead with plan to simplify retirement

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The Federal Government has released a consultation paper on Retirement Income Disclosure, which is aimed at helping consumers maintain an appropriate standard of living in retirement.

The paper proposes a range of measures to help consumers assess how a retirement income product aligns with their own preferences in relation to potential income, flexibility and risk management.

Choosing an appropriate retirement income product necessarily requires consideration of trade-offs between income, flexibility and risk management. However, it is rare for these trade-offs to be made explicit in product disclosure documents.

Product disclosure statements rarely include information about levels of expected income or cash flow in dollar terms, the likelihood of money running out under certain withdrawal or drawdown strategies, or the likelihood that income would be lower than expected.

The Government will present this information as fact sheets to better enable retirees to compare products.

The paper sets out how the options for these metrics and features could be presented, in order to help consumers make decisions and improve transparency in the industry.

“These fact sheets will cut through to the key features that matter when making retirement income decisions,” Assistant Treasurer Stuart Robert said in a statement.

“Currently, when people approach retirement they are confronted with complex legal and financial information, and long and complex documents.

“Typically, these documents do not provide clear information on the expected level, variability and duration of retirement income. This paper proposes an easy to read and understand document to supplement existing documents.”

In addition to the consultation paper, the Australian Government Actuary has produced a technical paper outlining the retirement income risk measure and the method of calculation.

Do you still find retirement income products confusing? Are you glad the government is doing more to make the options more easily understood?

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Written by Ben



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