Super funds accused of not doing enough for your retirement

Your super fund is required by law to create a personalised retirement strategy for you to ensure you will have enough money to maintain your lifestyle in retirement. But two of Australia’s financial regulators say funds aren’t doing enough to ensure that strategy is on track.

The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) are calling for superannuation trustees to increase their efforts in tracking and measuring the outcomes of retirement strategies to ensure they are achieving what’s needed.

What are funds meant to be doing?

As part of the Retirement Income Covenant (RIC), first introduced in 2022, super funds are required to create a bespoke retirement strategy for each of its members, geared towards maintaining your current lifestyle in retirement.

The super fund trustees are meant to be monitoring the results of these strategies to ensure they’re on track, and make any adjustments as needed.

But a recent joint review by the two regulators of the broader superannuation industry showed that while trustees have made some progress – there are still significant gaps remaining in fully implementing the RIC.

Mainly, it appears many super funds are saying one thing but doing another. A survey conducted as part of the review found approximately three quarters of trustees said measuring retirement outcomes was a priority for them.

What is actually happening?

But in reality, only incremental progress has been made to measure and track retirement income strategies. Just eight trustees said tracking the effectiveness of retirement-focused assistance to members was a priority.

The review found many trustees were taking steps to better understand the retirement needs of their members, but only one-in-five said they were taking concrete steps to turn those needs into actions.

In their defence, the super funds highlighted several challenges with implementing the RIC, including uncertainty around the legality of financial advice, privacy, security, and cost concerns around collecting more member data.

Margaret Cole, deputy chair of APRA Deputy Chair Margaret Cole says she’s disappointed super funds aren’t making much progress on the RIC, despite the fact a previous report had also found a lack of progress a year earlier.

“The most concerning finding from this survey is the lack of progress being made by trustees in tracking the success of their strategies, especially as this was highlighted as one of the key areas in need of improvement,” she said.

“Without effective success metrics, how can trustees know that their strategies are working? Members deserve better.”

ASIC commissioner Simone Constant concurred and says super trustees have a responsibility to the members they serve to get their retirement right.

“Trustees have a pivotal role to play in improving retirement outcomes for their members, with approximately three million Australians expected to join the six million already eligible to access their superannuation savings over the coming decade,” she says.

“Pleasingly, trustee responses to the survey indicate they are pushing ahead with work to refine their strategy implementation. However, we expect trustees to assess gaps and identify opportunities to accelerate progress in closing these gaps, including by leveraging examples of progress outlined in this industry update.”

Not all bad

The joint investigation wasn’t all doom and gloom for the super funds, with the report acknowledging “increased effort being placed on understanding members’ needs”, with more than 80 per cent of trustees indicating they were planning to do a deep dive of member data to identify any planning gaps.

Many super trustees also indicated their governance and oversight procedures are being updated to address the retirement phase, which had been identified as an area of neglect compared to the accumulation phase.

Has your super fund developed a retirement strategy for you? How is it coming along? Let us know in the comments section below.

Also read: Super returns stabilise in May

Brad Lockyer
Brad Lockyer
Brad has deep knowledge of retirement income, including Age Pension and other government entitlements, as well as health, money and lifestyle issues facing older Australians. Keen interests in current affairs, politics, sport and entertainment. Digital media professional with more than 10 years experience in the industry.
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