Task
The Australian Government is in the development of more efficient retirement income
products, which are typically referred to as ’Comprehensive Income Products for Retirement’, or CIPRs. The aim of developing CIPRs is to “increase individuals’ standard
of living in retirement, increase the range of retirement income products available, and
empower trustees to provide members with an easier transition into retirement.”
On 17 May 2018, the Australian Government released a position paper regarding CIPRs
(CIPR Position Paper.pdf). This position paper provides the definition of CIPRs and
proposes that superannuation fund develop and offer CIPRs to their members.
You (and your other group members) work in CaseStudy Super Fund that has a very large
pool of members. You can assume that CaseStudy Super Fund’s members have the same
demographic characteristics as the Australian population. You are given a task to write
a business report, interpreting the features of CIPRs and evaluating the Government’s
proposal that super funds develop and offer CIPRs to their members.
You come across an Excel model (MDUF Static Calculator.xlsb), which is developed by
Mine Super Fund (previously known as Mine Wealth and Wellbeing Super Fund).
This Excel model simulates outcomes and estimates utility for four different static retirement outcome solutions. Mortality risk and investment risk are modelled stochastically
and the Age Pension is incorporated. This model has four cases that correspond to four
simplified retirement income products, including:
(1) 100% life annuity
(2) Minimum drawdown rule on Account-Based Pension
(3) Target constant income stream on Account-Based Pension
(4) Target constant income stream with x% in life annuity and 1 − x% in AccountBased Pension, where 0 < x < 1.
Note: After you accepted the disclaimer, you will be able to view the model. The
“Inputs” tab details the model inputs and assumptions as well as the four cases. The
“Comparison” tab shows, for each case, the simulated retirement incomes (Income), the
simulated Age Pension amount to be received (Age Pension), the simulated drawdown
amount from Account-Based Pension (Drawdown), the simulated amount of wealth if
the individual dies (Residual Account), and the decomposition of expected retirement
incomes (Average Income Sources).
In your report, address the following key points:
• Demonstrate your understanding of the Government’s aim of developing a CIPR
initiative.
• Demonstrate your understanding of CIPRs.
• Use the provided Excel model to compare the four cases and determine if each
of these cases meets the definition of a CIPR.
3
• Evaluate the impact (positive and/or negative) of a CIPR on an individual’s
retirement outcome, taking into account individuals’ demographic characteristics
and financial situations.
• Make a recommendation to the board of CaseStudy Super Fund as to whether
the fund should develop and offer CIPRs to some or all of their members.
Marking Criteria
Marks will be awarded for:
• Clear and concise writing in the report
• Addressing the key points from the task
• Thorough analysis of the four retirement cases and clear representation of quantitative results
• Thorough evaluation of CIPRs
• Appropriate recommendations
• Interaction with other sources and correct referencing