The Retirement Income Covenant and its new super fund rules took effect on 1 July.
The broad purpose of the Retirement Income Covenant (RIC) is to encourage superannuation funds to focus on the retirement phase of superannuation, rather than just the accumulation (pre-retirement) phase. The legislation is more principles-based than prescriptive, with the aim of encouraging funds to innovate to improve outcomes for their members in retirement.
The RIC demands that funds prepare a retirement income strategy for all members. This includes the possibility of different strategies for different cohorts, and to regularly review those strategies.
Almost three months down the track, the news is not all good for retirees.
Mixed responses from funds
Investment Magazine conducted a survey of some of the larger funds to see how they had responded.
Industry fund AustralianSuper used the RIC as a marketing opportunity, with statements pointing members to what is on offer and what they need to look for.
Commonwealth Superannuation Corporation (CSC) provided an in-depth statement of what the fund offered and what is to come.
Other funds came somewhere in between those two extremes. The aspects of the various funds should become more obvious over the next few years, as each seeks to use the RIC to advantage.
Justin Arter, chief executive of industry fund Cbus, views the new legislation as an opportunity to attract more members. Originally a building industry super fund, Cbus now caters to a diverse membership.
“In the next decade, there will be an increase in members retiring and drawing on their savings and an increased focus on their needs. Crucial to the future and growth will be delivering more for members at retirement. Our retirement income strategy will play a key role in that delivery,” he said.
More diversity needed to manage retirement needs
Jon Sedawie, Cbus head of retirement, said: “Our members have a diverse range of retirement needs and the strategy caters to this diversity. To meet these needs, our strategy is not just about product, but also covers improved member guidance, education and referrals.”
The first retirement strategy delivered by Cbus saw members divided into groups with the aim of tailoring products to each.
The Cbus approach identified six cohorts: early involuntary, early and modest, going okay, modest, age pension and optimisers. For each, it identified goals and “three to five years of strategy deliverables”.
Also included in the Cbus strategy was a list of ‘initiatives’, an example of the marketing component used by several funds.
In the Investment Magazine analysis of various fund statements, one consistent drawback identified was in actually locating them online. “The required summary statements were often difficult for a novice to find,” said writer John Durie.
This shortcoming might be resolved as the funds evolve in response to the Retirement Income Covenant. The retirement strategy statement domain will evolve too, making it very much a ‘watch this space’ area of superannuation.
Has your fund provided you with a retirement strategy statement? Was it useful to your planning? Why not share your experience and thoughts in the comments section below?