Australia’s superannuation funds do a great job supporting members in the accumulation phase, but are still not doing enough for members in the retirement phase, the deputy chair of the Australian Prudential Regulation Authority (APRA) has told a conference.
Speaking at the Conexus Retirement Conference, APRA deputy chair Margaret Cole told the audience of super industry figures that too much time, money and marketing was going towards attracting new members (and their money) and not enough on meeting member needs post-retirement.
“Members in the accumulation phase share one simple, if obvious, need: to build assets to fund their retirement,” she told the audience.
“By sharp contrast, the needs of members in the retirement phase of superannuation are far more diverse, and understanding and supporting these needs will be complex.”
Ms Cole says superannuation marketing often focuses on smiling older couples with grey hair happily enjoying their retirement, the implication being that members can expect a well-supported transition from the accumulation phase to retirement. But she says APRA’s own review shows that’s often not how things play out in reality.
Super funds are required by law under the Retirement Income Covenant (RIC) to develop individualised retirement income strategies for each member designed to deliver the type of lifestyle in retirement the member is seeking.
Another law, the Financial Accountability Regime (FAR), adds another layer of responsibility. Designed to “improve the risk and governance cultures” of Australian financial institutions, the FAR will apply to superannuation funds from March 2025.
The FAR sets out a number of rules around financial accountability, personnel levels, and notification obligations all geared towards improving outcomes.
Both the RIC and FAR require super funds to measure the success of strategies developed for members, but Ms Cole says progress reports show very little movement in this area.
“It is the lack of progress in tracking the success of retirement income strategies, an area specifically called out in the thematic review report, that is most concerning,” she said.
“It begs the question – without specific and measurable success metrics, how can you measure the effectiveness of your retirement income strategies?”
Retirement support different for everyone
But she did acknowledge that unlike supporting members in the accumulation phase, who are all just trying to grow their nest egg, what support for someone in the retirement phase looks like will be different for everybody.
“Under the covenant, you are required to support all members who are in or approaching retirement, regardless of the size of a member’s super balance, their level of engagement with super, or whether they have access to financial advice,” Ms Cole says.
She says this lack of support comes in part from the fact many super fund trustees aren’t really aware of what different cohorts of retirees need.
“The challenge is magnified by the sheer volume of members heading towards retirement, with an estimated three million fund members to reach preservation age in the next decade” Ms Cole said.
“For an industry that has focused heavily on super accumulation for the past three decades, the need to pivot to a stronger and more nuanced approach to retirement could not be more pressing.”
Have you heard anything about your fund’s retirement income strategy? When was the last time they contacted you at all? Let us know in the comments section below.
Also read: Super contribution rules ‘confusing’, older Aussies say
Each year at this time, I struggle to find a page on my super statement that shows me contributions by my employer in detail, and what % returns my 2 catorgies made. Lots of information and other info but a simple statement that addresses the return on my money is hard to find.
It is true that we have to struggle to find full details of of contributions and returns. Most probably people handling such tasks are not up to the level to understand what is important to the members. They could be young trying to do marketing of other strategies but we are the people almost reaching our retirement who are more interested in what we have, what the employer contributed and % of returns. Anything else can come later.
The answer to your last question..”Have you heard anything about your fund’s retirement income strategy?”……Never.
The internet (and this website) is rife with the same question “How much will you need in retirement?” In an era of AI, couldn’t some smart programmers and financial planners put a tool together (like what exists from some super funds, but on steroids) that asks a series of questions about current financial position, long term goals, future budget/spending estimates, age etc. that produces a series of scenarios with related risks, that then might pose some decisions for the person, including caveats? I realise that not everyone might be good with their financial situation or forecasting their future needs and expenditures, and for those, there could be support through affordable advice – much in the same way as some can do their own tax while others use an affordable service from a tax agent.
What has been a big roadblock against the constant recommendation “You should seek independent financial advice” is that one has to pay for the 90-page report at $3,500+ when all they really want to know is what is shown on (say) pages 16 and 17 of said report. Reducing the onus and risk mitigation of financial planners (thus lowering the cost) and/or allowing specific advice to be charged to the person’s super fund (up to a capped amount) might go some way to helping people be more informed. How about even making a once every 10-year review become tax deductible?
The people that could really benefit from this approach are the 3 million approaching retirement and those in retirement (to check that things are going to plan). Surely the super funds have enough money behind them that such online self-help programs could be developed, thus giving a measure of tailoring retirement income strategy to the individual?