The Retirement Income Covenant (RIC) will be the missing piece that allows funds to optimise the retirement income of members when they retire, according to the Australian Institute of Superannuation Trustees (AIST).
Currently in consultation phase until the middle of October, the RIC would oblige trustees of superannuation funds to develop a plan to help members at the time of retirement.
David Hayes, AIST policy manager, said one reason for supporting the change was to help the industry adapt with an aging population.
“This new, third piece would require funds to optimise the retirement income members receive when they are retired. It’s the missing piece of the puzzle,” Haynes said.
“The focus to now has been on getting money into superannuation, and looking after it. The overwhelming majority of members have been in the accumulation stage, and only a small number of members have been in the retirement income stage.
“That’s changing as funds become more mature and there’s more money in super accounts. As members are ageing, there’s a greater proportion of members who are in, or approaching, retirement income stage now.”
He said the change would also encourage Australians to reach their spending capacity so they could best enjoy their later stages of life.
“That’s another piece of the jigsaw – the government doesn’t want you to bequeath your super, it wants you to use it,” Haynes said.
“This Government is not a big one for compulsion, so it wants this to be a flexible scheme that encourages people to spend more of their super, but it may come with some not-so-subtle requirements to do so.”
Haynes said the inquiry into the quality of financial advice, expected to go ahead next year, should be brought forward to run in tandem with the RIC as accessible and affordable quality advice was needed.