The terms of reference for a review into the provision of defined benefit pensions by DIY and other small superannuation funds were announced today by Minister for Revenue and Assistant Treasurer, Mal Brough.
The review, part of a package of measures announced by the Government on 23 June 2004, will examine options for small funds to provide pensions to their members. Consideration will be given to the design features of prospective pensions that could attract complying status for taxation and social security purposes.
"I encourage all interested parties to make a submission to the review, to ensure that all viewpoints can be properly considered," Mr Brough said.
Initial submissions are welcome until Friday 1 October 2004. Treasury will then produce a discussion paper outlining key issues and options. It's expected the discussion paper will be released by the end of the year and, following a further round of consultation, Treasury will report to Government by April 2005.
(Terms of Reference attached.)
Contact: Carlie Hogan - (02) 6277 7360
REVIEW OF THE PROVISION OF PENSIONS IN SMALL SUPERANNUATION FUNDS
The Government has been advised, including by the Government Actuary, of a number of concerns with the provision of defined benefit pensions in small superannuation funds, namely:
- access to unintended tax and social security benefits, particularly from the use of 'RBL compression';
- their use for estate planning purposes in the superannuation system outside what was intended and not available to other superannuation fund members; and
- whether a small number of members can effectively pool risk and guarantee income payments over the term of the pension.
The Government has established a team to address these concerns and review the provision of pensions in small superannuation funds.
The review will examine options for small superannuation funds to provide pensions to their members, including consideration of:
- Design features of prospective pensions that address the Government's concerns and that could attract complying status for taxation and social security purposes.
- Management of investment, liquidity and mortality risks.
- Likely future demand for pensions with defined benefit characteristics.
The review will be conducted by a team within the Department of Treasury, including a representative from the Australian Government Actuary's Office, and will consult with industry and other stakeholders, superannuation regulators and the Department of Family and Community Services.
An initial round of consultation will aid Treasury in developing a discussion paper. The Treasury discussion paper will outline key issues and canvas options and is expected to be released by the end of the year. Following further consultation, Treasury will report to Government by April 2005.
Interested parties are invited to make initial submissions on the above issues up until 1 October 2004.
Submissions can be sent to superannuation@treasury.gov.au or mailed to:
General Manager
Superannuation, Retirement and Savings Division
The Treasury
Langton Crescent
PARKES ACT 2600