The Government has released its retirement income covenant position paper for consultation.
It said the covenant would codify the requirements and obligations for superannuation trustees to improve retirement outcomes for individuals, while enabling choice and competition in the retirement phase.
The paper outlined the fundamental obligations of trustees to formulate, review regularly, and give effect to a retirement income strategy.
The strategy, it said, would be a strategic document developed by the trustee to outline their plan to assist their members to achieve and balance objectives which were:
- Maximise their retirement income;
- Manage risks to the sustainability and stability of their retirement income; and
- Have some flexible access to savings during retirement.
“Requiring trustees to have a retirement income strategy ensures that they identify and recognise the retirement income needs of the members of their fund and have a plan to build the fund’s capacity and capability to service those needs,” the paper said.
“The strategy should reflect a trustee’s broad understanding of their membership, either for the members of the fund as a whole or for cohorts of members. The characteristics of these cohorts are at the discretion of trustees but could be determined by factors such as superannuation balance, home ownership status, partnered status, or age of retirement.”
The paper outlined a summary of obligations and discretions of trustees that included:
- Core obligation;
- Member coverage by the strategy;
- Sources of retirement income;
- Maximising retirement income;
- Managing risk;
- Flexible access to savings;
- Balancing strategy objectives; and
- Reviewing the strategy.
The Government said it would consult further on exposure draft legislation later this year. Subject to the passage of legislation, this covenant would commence from 1 July, 2022.
The consultation of the paper would close on 6 August, 2021.