Super funds will be allowed to offer more “innovative products” including payments delivered in instalments rather a lump sum and money-back guarantees, under sweeping reforms announced by Treasurer Jim Chalmers.
Speaking via video link at the Association of Superannuation Funds of Australia (ASFA) conference, Dr Chalmers said the reforms are geared towards improving the retirement phase of superannuation by giving retirees more options in how they use their super.
“We are working to ensure there is as much of a policy and product focus on the retirement phase as there is on the accumulation phase,” he said.
“Today I am announcing a new package of reforms that will help give retirees peace of mind, help them make their super go further and provide more support to navigate retirement.”
These changes will empower more Australians to make the most of their superannuation through more trusted information, better products and greater transparency.
He said the superannuation system is reaching a “pivotal moment” and that more than 2.5 million Australians are expected to retire within the next decade.
“Within two decades, most people retiring will have been accumulating superannuation at nine per cent or more annually for the duration of their working lives,” the Treasurer said.
What are the changes?
Dr Chalmers outlined four key areas of super the government is looking to reform: delivering better retirement products, improving independent financial guidance, establishing best practice (but voluntary) principles for retirement products and introducing a new reporting framework measuring retirement outcomes.
Delivering better retirement products
The biggest change flagged was a loosening of regulations to allow super funds to offer different kinds of retirement income products, giving retirees more options in how they receive their money.
“We are improving the innovative income stream regulations and supporting more innovation in retirement products,” Dr Chalmers said.
“These changes will allow funds to offer product features that members want, such as money-back guarantees and instalment payments instead of an upfront lump sum.”
Improving independent guidance
The Moneysmart website will be given a refresh along with some extra resources to ensure retirees have access to a free, independent and reliable source of information on retirement products.
Best practice principles on retirement products
Dr Chalmers said Treasury is working on a set of guiding principles for the superannuation industry for designing “modern, high‑quality retirement products that support Australians’ financial security in retirement.”
Reporting framework for retirement outcomes
Measuring real-life retirement outcomes with a view to understanding and improving them is key to superannuation ongoing success, Dr Chalmers says. He wants to introduce a new reporting framework that will track actual retirement income levels against wider economic markers.
“This will offer members greater transparency and create common understanding for success in the retirement phase.”
He says the new retirement reporting framework will commence from 2027, and help monitor outcomes for members in retirement in a consistent and transparent way.
Advocacy groups praise proposals
The reaction to the announcement has been largely positive. Mary Delahunty, ASFA CEO, welcomed the increased effort from government to educate Australians about what to do with their money – a responsibility she says is too often delegated to super funds.
“Improving consumer education is key to helping Australians make informed decisions about their retirement,” she says.
“Clearer guidance and tools like Moneysmart will empower fund members to engage more actively with their super, ultimately leading to better retirement outcomes.
Super funds have shouldered a lot of the responsibility for educating Australians – we welcome an increased effort from the government in this area because it is so important in helping people make good decisions.”
The Council on the Ageing (COTA) echoed the education sentiment, with CEO Patricia Sparrow calling the reforms a “solid downpayment on improving retirement.”
“It’s really hard for people to know what to do in planning for, and managing, the retirement phase of our lives,” she says.
“The system is complex to navigate and overwhelming for many people. It’s important we change that.
“We’ve seen measures introduced over the years to improve the way we save for retirement, but now we’re finally seeing some improvements to the way people are able to manage their superannuation in retirement.”
Do you think the reforms with make real improvements to retirement? What kind of alternative super products would you be interested in? Let us know in the comments section below.
Also read: How to stop fees draining your super fund
