‘Super only doing half its job’

The superannuation sector has reached ‘critical mass’ but its ability to meet post-retirement needs remains underdeveloped, according to leading investment management firm Challenger.

In its submission to the Treasury consultation on retirement income, Challenger’s retirement income chairman Jeremy Cooper called for superannuation to work harder for those who have retired.

“Providing income in retirement is fundamental to the purpose of super, but currently there is no retirement-specific governance framework,” Mr Cooper explained.

“Our super system is more mature than most people realise. It’s doing the first part of its job, allowing people to accumulate assets through their working lives, with typical household super wealth at retirement in the $350,000-$500,000 range and increasing.

“This wealth was accumulated to provide income in retirement, but the system is not yet set up to do this next phase successfully.”

Mr Cooper explained that Challenger supports the recent Treasury proposal to introduce a covenant in the superannuation laws to ensure the legislative arrangements for the retirement phase of super keep pace with the size and importance of the system.

The Challenger submission says that the Treasury proposal that superannuation funds assist older members by developing a retirement income strategy for the fund will plug a significant gap in the Superannuation Industry (Supervision) Act. Currently, retiring members do not have the benefit of such a provision and neither do fund trustees.

The submission adds that the development of comprehensive income products for retirement (CIPRs) will provide better outcomes for retirees by delivering higher income through pooling mechanisms that reduce the risk of running out of money in retirement, as well as the benefits of longevity protection and capital flexibility.

Mr Cooper said that the CIPR proposal was not a revolutionary change, but a necessary enhancement for a system that will have $1.3 trillion heading toward retirement by 2030.

Related articles:
Super scammers target savings
Super insurance costs to soar
Aussie super funds bounce back

Written by Ben

RELATED LINKS

ATO warns of super scammers targeting retirement savings

Scammers encouraging people to access their retirement savings early.

Super insurance costs set to soar, KPMG warns

Removal of default cover set to have a big impact, accounting firm warns.

Aussie super funds back on track despite global chaos

Super funds bounced back in May despite global tensions shaking the market.



SPONSORED LINKS

LOADING MORE ARTICLE...