It’s just over a year since the federal government introduced the Retirement Income Covenant (RIC). The aim was to improve the outcomes for super fund members in the retirement phase. Given Australia’s ageism population, funds were encouraged to boost their focus on members in the retirement phase.
Nearly 16 months on, there are concerns about a lack of progress from at least some super funds. These concerns have been raised by government bodies, not just member advocates.
Both the Australian Securities and Investment Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) have identified perceived shortfalls. They say super funds need to join forces if they can’t individually fulfil RIC obligations.
While many funds remain highly effective at managing the accumulation phase, some are struggling to adjust that focus.
APRA deputy chair Margaret Cole said some fund trustees may be realising they don’t have the capacity to develop both. Ms Cole was speaking at this month’s Retirement Conference, co-hosted by Conexus Financial and the Conexus Institute.
RIC strategies require ‘clear and courageous’ action
Some funds have been unable to “plan to develop ‘success in retirement’ as a core competency,” Ms Cole stated. She called on trustees to be “clear and courageous” in identifying weaknesses and taking action that’s best for members.
“In some cases, this may even necessitate helping members to move to other funds that better meet their needs in retirement,” she said.
Ms Cole acknowledged that progress in implementing RIC strategies had been made. She also pledged that APRA and ASIC would continue to look for ways to work together and with the industry. However, she stressed the urgent need to make further changes to help members achieve financial security in retirement.
“There is an urgent need to improve the experience of [Australians] approaching and in retirement,” she said. This includes the “terms of the quality of assistance offered, including the financial outcomes delivered, for superannuation members,” she said.
Driving the ‘urgency’ sentiment is the dramatic demographic change Australia will undergo in the next decade. There are currently six million Australians at or above super preservation age. But in the next 10 years, a further three million members are due to become eligible to draw from their super.
That’s a jump of 50 per cent, a figure that provides a stark justification for Ms Cole’s use of the word ‘urgent’.
What else has the past 12 months taught us?
Ms Cole was not the only speaker to discuss the progress made by trustees since the introduction of the RIC. ASIC senior executive leader for superannuation and life insurance Jane Eccleston set about clarifying some misunderstandings about RIC obligations.
Ms Eccleston identified three main misunderstandings:
- personal financial advice as part of the covenant
- more data being part of the solution
- and the assumption that more data collected consequently results in financial advice.
Addressing the first of these, Ms Eccleston acknowledged that “fundamentally, superannuation funds are product providers”. These funds cannot realistically have a business model whose success is entirely contingent on making individual product recommendations to customers, she said.
Regarding data collection, a subject that is causing confusion in terms of the amount collected, Ms Eccleston was forthright. “Let me be very clear – what we don’t want is trustees collecting endless amounts of member data. What we want is trustees considering what data they need to assist them to develop, implement and review their retirement income strategies.”
The next 12 months
A year after its introduction, it appears the RIC has gone some way towards achieving its aims. However, progress has not been as rapid as either ASIC or APRA would like. While both agencies have pledged to continue working with the industry, it will be interesting to see their attitudes a year from now.
Have you noticed any changes in your super fund’s focus in the past year? Are you happy with the support provided by your fund? Let us know via the comments section below.
Also read: Push to make retirees withdraw more of their super every year
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It is very disappointing, our super funds do not have the welfare of there members at heart. After all, our superfunds in total is the fourth biggest in the world.
Eighteen months ago, my superfund asked what did we think of them. I questioned them, why didn’t they invest in aged care and homecare, and give some benefits to someone like me. They told me, they haven’t thought about it and will get to me about it. Well, I am still waiting their answers.
I know they are not supposed to have a business model, but their job is to preserve our nest eggs to last us to the end of our retirement. To do that, they need to take reasonable risk to preserve the fund in management. I asked my superfund, why didn’t they invest in gold when there was a financial crisis. Their response was, they never invest in gold. I asked them why not. I received no response.
My experience indicated, do superfunds care about what their members think of the manners they look after the funds under management
Curious 16 August 2023 at 4:17 pm
It is very disappointing, our super funds do not have the welfare of there members at heart. After all, our superfunds in total is the fourth biggest in the world.
Eighteen months ago, my superfund asked what did we think of them. I questioned them, why didn’t they invest in aged care and homecare, and give some benefits to someone like me. They told me, they haven’t thought about it and will get to me about it. Well, I am still waiting their answers.
I know they are not supposed to have a business model, but their job is to preserve our nest eggs to last us to the end of our retirement. To do that, they need to take reasonable risk to preserve the fund in management. I asked my superfund, why didn’t they invest in gold when there was a financial crisis. Their response was, they never invest in gold. I asked them why not. I received no response.
My experience indicated, do superfunds care about what their members think of the manners they look after the funds under management? Maybe, they do but don’t know how to do it? That is a worry!