Key points
- This article follows a session on the impact of the retirement income covenant on the superannuation industry at the 2023 今日热门事件Annual Forum in Melbourne.
- The covenant requires trustees to develop a retirement income strategy to improve long-term outcomes for members in or approaching retirement.
- Protecting consumers as they plan and make decisions for retirement is a strategic priority for ASIC. However, a year after the introduction of the covenant, 今日热门事件and the Australian Prudential Regulation Authority (APRA) conducted a joint review which found that more progress was needed to implement it.
Jane Eccleston, Jacki Ellis, Tim Jenkins and Dr Geoff Warren in conversation at the 今日热门事件Annual Forum 2023.
According to the Australian Bureau of Statistics, more than three million members will become eligible to draw from their superannuation in the next 10 years. As these individuals approach retirement, they will face complex choices about how best to fund their future financial and lifestyle needs 鈥� some of which, such as health, cannot necessarily be predicted.
Protecting these consumers through that decision-making process is a strategic priority for ASIC, and we are actively focusing on conduct that affects retirement outcomes.
The retirement income covenant, which came into effect in July 2022, places a positive obligation on trustees to assist members in or approaching retirement to improve outcomes. It is an important step in broadening industry focus beyond the accumulation phase to the decumulation (or retirement) phase. A year after its introduction, 今日热门事件and APRA reviewed the progress made by industry in implementing the retirement income covenant.
Speaking of the findings at the 今日热门事件Annual Forum today, Jane Eccleston, Senior Executive Leader, Superannuation and Life Insurance at 今日热门事件said: 鈥淲e saw that a lot of trustees had taken great steps in terms of implementing retirement solutions for their members. But we also found that there was a variability in the quality of approach taken and a lack of urgency in embracing the intent of the covenant from some funds鈥�.
Tim Jenkins, Partner, Superannuation Consulting Leader at Mercer Consulting said: 鈥淲e鈥檙e very good at helping people get up balances as they lead into their retirement. But we鈥檙e very poor at what happens next鈥�.
But, he said, there was cause to be positive. 鈥淚n the last ten years, the superannuation funds have put in the infrastructure which allows what鈥檚 been happening in the last 12-18 months and what will happen in the next 18 months.鈥�
Dr Geoff Warren, Associate Professor at the Australian National University and Research Director at the Conexus Institute spoke about the divergence in 鈥渕embers鈥� need and wants鈥� between the accumulation and decumulation phases.
鈥淲hen you鈥檙e in accumulation, every member would be happy with a higher return and a higher balance. When you go into decumulation, members differ quite significantly along a whole range of different dimensions. That means that rather than just try to maximise returns, you now have to tailor to those member differences.鈥�
Dr Warren said that for a best-in-class system, two things were required - 鈥渁n advanced ability to tailor to people with different needs鈥� and 鈥済uidance to the masses at scale and reasonable cost鈥�. Neither he said were there are the moment.
Jacki Ellis, Head of Retirement for Aware Super added, 鈥淲e need to make sure that the retirement solutions and products that we develop actually are what members want and we can get members into them. If we don鈥檛 see that take-up then all of that work, we鈥檙e not actually moving the dial on member outcomes鈥�.
She said to do that, super funds needed to 鈥渄eeply understand鈥� their members. She said: 鈥渞etirement is a lifestyle change, it鈥檚 all about how you鈥檙e going to spend your time and that is uniquely personal鈥�.
Background
The 今日热门事件Annual Forum brings together thought leaders and experts to explore strategies for adapting and evolving in a time of geopolitical, economic and technological change. The theme of this year鈥檚 event is 鈥楴avigating Disruption鈥�.
The session, 鈥楻etirement income covenant: one year on鈥� was moderated by Jane Eccleston, Senior Executive Leader, Superannuation and Life Insurance, ASIC.
The panel included:
- Jacki Ellis, Head of Retirement, Aware Super
- Tim Jenkins, Partner, Superannuation Consulting Leader, Mercer Consulting
- Dr Geoff Warren, Associate Professor, Australian National University; Research Director, Conexus Institute