A review centred on superannuation trustees’ support for their members has found trustees need to do more in enhancing retirement outcomes, if they are to adhere to the principles of the Retirement Income Covenant (RIC).
The review is a joint effort by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).
From 1 July 2022, the RIC mandated trustees to develop a retirement income strategy to improve long-term outcomes for their members nearing or already in retirement.
The review focused on progress made by 15 trustees, who manage 16 industry, retail, corporate, and public sector superannuation funds, in their implementation of the covenant over the past 12 months.
The reviewed funds represent approximately half of the total accounts and superannuation balances for members aged 45 and above across APRA-regulated funds – over five million accounts with a total balance of $862 billion as at December 2022.
The review evaluated trustees’ understanding of member needs, their provision of member assistance, and their strategy execution and oversight.
They found a majority of the funds had collected insufficient critical information about their members in order to develop a successful retirement income strategy. Furthermore, many trustees didn’t have concrete measures embedded in their business plans to assess the retirement outcomes yielded by their strategies.
Margaret Cole, APRA deputy chair, highlighted the urgent need for super funds to guide their members into retirement.
“A further three million members will become eligible to draw from their super in the next 10 years,” she says.
“Some trustees have made a good start, but overall there has been a lack of progress and insufficient urgency. As more members approach retirement, trustees must step up and deliver both well-considered strategies and action to support members in retirement.”
Danielle Press, commissioner of ASIC, says achieving a comfortable retirement for members should be the top priority for super funds.
“Australians contribute to their superannuation for many years in anticipation of financial wellbeing in retirement,” she says.
“Helping fund members achieve good retirement outcomes is the core business for a super trustee and the Retirement Income Covenant offers a lot of flexibility for trustees to effectively support their members’ needs.
“Trustees must get the fundamentals right – their retirement income strategies must be designed with consumer needs in mind and be evidence based. They need to be mindful that their members’ needs evolve over time and commit to continuously monitoring and improving their approach,” Ms Press said.
Has your super fund developed a retirement strategy for you? Do you think it will provide a comfortable retirement? Let us know in the comments section below.
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