ASIC tightens rules regarding retirement calculators

ASIC has tightened the rules regarding retirement calculators.

ASIC tightens rules regarding retirement calculators

The Australian Securities and Investments Commission (ASIC) has tightened the rules regarding superannuation retirement calculators to ensure that they are adjusted for inflation.

The new requirements will start on 5 December this year to give calculator providers a workable transition period.

The amendments require superannuation and retirement calculator providers to adjust for inflation in estimates by using either:

  • the default inflation rate set out in the instrument for superannuation and retirement calculators; or
  • an alternative inflation rate, as long as certain disclosure requirements are met.

The default inflation rate set out in the instrument is the rate used by ASIC’s MoneySmart superannuation and retirement calculators. It includes a component that reflects changes in the cost of meeting increases in community living standards.

Adjusting for the cost of meeting increases in community living standards may assist users to better decide if future retirement assets or income will be adequate compared to their standard of living.

ASIC will amend the instrument in June each year to reflect any changes in the default inflation rate used by ASIC’s MoneySmart superannuation and retirement calculators. This rate is reviewed and updated annually.

The option of using an alternative inflation rate recognises that there may be instances where it is appropriate for a superannuation and retirement calculator to use a different inflation assumption – for example, to take into account:

  • the wage profile of the likely users of the calculator; or
  • the provider’s wage growth outlook.

If the alternative inflation rate used does not include a component that reflects the cost of meeting increases in community living standards, the superannuation or retirement calculator must explain the implications of not taking into account the cost of meeting those increases. 

Superannuation and retirement calculators can be a useful and cost-effective educational tool through which users can better understand their financial circumstances and goals.

The amendments to the instrument will promote the comparability of superannuation and retirement estimates, while providing flexibility for providers to use a different inflation rate assumption, where it is reasonable to do so.

Until the changes start on 5 December 2019, superannuation and retirement calculators must disclose whether or not estimates take into account changes in the cost of living.

Which retirement calculators do you use? Does yours take inflation into account?

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    11th Jul 2019
    This is a minefield. Just check your super funds publicity on rates achieved and you'll see a 10 year average when it suits and a different term when it doesn't. There is always the disclaimer that past rates don't reflect future earnings. There is also the promotion of some options that have achieved a high rate and omitting those that don't. Growth options will always achieve a high when times are good but we are advised to spread our options. The result is that we only achieve a portion of the advertised rate.

    Just as the health insurers need to supply a range of increases, not just an average, super funds should be made to advertise the rates for each option with a 10 year average as well as a 1 year average. That way investors will be able to compare like with like.
    11th Jul 2019
    OM, the biggest issue I see is that there is a disconnect between the average person and their Super.

    Too many people sit back and leave their Super to others to manage. It does not take much to understand the basics of Super. At the end of each year you receive a statement from the Fund saying: funds at opening of financial year, contributions for the year, earnings for the year and closing balance at end of financial year. Easy to keep track.

    Simply keep the pieces of paper and you can work out where you are heading forward or backward and determine a strategy from there. Keep it on a spreadsheet and add in an inflation rate of "x" per year. People don't have to be real smart to have a general idea regarding their financial future.
    Karl Marx
    11th Jul 2019
    Any calculator is only a guide as to much can change over even a short period of time. Not just your financial situation which may even improve, but cost of living, other expenses etc.
    Personally I don't bother with my funds calculator, just keep my own checks & balances & adjust as required
    11th Jul 2019
    Old Man - Don't know why you're going on about the returns of super funds - nothing to do with this article.

    They are talking about the different calculators that can be used to work out what your income maybe when you retire.

    I use the ASIC MoneySmart calculator. Actually I worked out all my figures using spreadsheets with differing returns and inflation rates. I completed quite a few, some with super fund money others with an account based pension. Then I came across this calculator, I put in my figures and the results were very similar. So I'm quite confident that the calculator gives a fair result and can be relied upon to work out your future.

    Obviously policy can change, returns can change but that's always a problem, all you can do is go with what government policy is now and in my case be very conservative with return rates, anything extra is a bonus.

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