New retirement income tool aimed at helping you save

Just when you thought you knew all there was to know about superannuation, there’s a new acronym in town – the RIC.

You might be suffering from acronym overload, given the number we’ve been bombarded with over the course of the pandemic – COVID, PCR and RAT to name but a few. But the RIC – the Retirement Income Covenant – is an acronym that will bring good news and prosperity to those who have retired or are planning to, at least in theory.

The RIC has been introduced to the Superannuation Industry Supervision Act 1993 and took effect on 1 July. Its purpose, in the words of the Australian Prudential Regulation Authority (APRA), is “broadening industry focus beyond the accumulation phase to advance the decumulation, or retirement, phase of superannuation, and in encouraging RSE licensees to innovate to improve outcomes for their members in retirement”.

Read: How much do you really need to retire?

In simple terms, it means encouraging super funds to get better at providing financial advice and strategies for those who have retired, rather than just for those in the accumulation stage prior to retirement.

Peter Chun, chief executive officer at UniSuper, says super funds for too long have been framing their purpose in a way that is “not conducive to people understanding retirement.” He says there needs to be a major change in how funds communicate to their members.

“We’re still anchored on the account balance,” Mr Chun said. “We still talk about annuities. We still talk about de-accumulation. We still talk about longevity. So I think we need to re-frame what we’re dealing with and it’s actually talking in our members’ language and helping them understand about spending, helping them understand about what their needs are.”

Read: How to plan for retirement when ill-health strikes

In conjunction with the RIC, the Australian Securities and Investments Commission (ASIC) has released Regulatory Guide 276 Superannuation forecasts: Calculators and retirement estimates (RG 276) and “a new legislative instrument updating the relief which facilitates the provision of superannuation calculators and retirement estimates”.

Simplified, this provides superannuation trustees with clarity around how they are exempt from certain regulatory requirements related to personal financial advice. This will make it easier for them to provide calculators to help those approaching and in retirement.

ASIC commissioner Danielle Press said: “Superannuation calculators and retirement estimates are important tools that can help consumers engage with their superannuation, especially as they approach retirement.

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“ASIC’s guidance will give greater clarity to trustees about how they can use calculators and retirement estimates as part of their strategies under the retirement income covenant.

“The updated relief will also provide greater flexibility in how trustees can give retirement estimates to their members, including through interactive tools.

“It introduces a single framework for setting economic and financial assumptions across both retirement estimates and superannuation calculators.”

She added that trustees were expected to provide these in a way that fostered informed decision making by members, “without promoting specific financial products”.

Steven Travis, investment manager at Aware Super, applauds the innovations in advice to deal with the scale and cost of making advice affordable to all members. However, he warns that calculators and ‘robo-advice’ tools should form part of a broader solution that brings together multiple mediums of advice as retirees go from the accumulation to the ‘decumulation’ stage.

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Andrew Gigacz
Andrew Gigacz
Andrew has developed knowledge of the retirement landscape, including retirement income and government entitlements, as well as issues affecting older Australians moving into or living in retirement. He's an accomplished writer with a passion for health and human stories.
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