Aware Super has urged the Government to provide appropriate guidance on Retirement Income Covenant (RIC) obligations as early as possible, stating it will allow trustees to meet the terms of the 1 July, 2022, compliance deadline.
In a submission to the Senate Economics Legislation Committee review of the Retirement Income Covenant bill, Aware Super recommended early consideration of regulatory requirements that would constrain a funds ability to offer tailored advice.
“For example, we have recommended that ASIC prioritise revisions to RG 229 (and [CO 11/1227]), and RG 167 Part D ([CO 05/1122]) to allow tailored income projections to be provided to members,” said Aware Super.
Aware Super said income projections provided on statements and many retirement income calculators relied on the RG 229 (and [CO 11/1227]), and RG 167 Part D ([CO 05/1122] and the ability to provide tailored information was constrained by the requirement to use standard assumptions that:
- May not accurately reflect a member’s superannuation investments and their likely investment outcomes; and
- Cannot be aligned with projections from more sophisticated calculators that funds may develop for use by their members.
“This means that retirement income projections provided on an annual statement may be at best confusing, and at worst actively misleading, to members seeking to engage with their superannuation,” Aware Super said.
Aware Super requested the Government give urgent review to The Class Order [CO 11/1227] to make sure statement projections were member friendly, reflected a members’ actual investment strategy, aligned with projections provided through the fund’s retirement calculator and avoided member confusion by enabling consistent messaging across various communications, tools and channels.
Aware Super also called on the Government, with supporting guidance from the Australian Prudential Regulation Authority (APRA), to specify that the income objective of the RIC would relate to real income which accounted for current inflation.
“Inflation plays a central role in retirement outcomes, which ultimately aim to provide retirees with the purchasing power to meet their needs/desired lifestyle,” Aware Super said.
Aware Super said the Government also needed to ensure all language in the upcoming RIC legislation, explanatory materials and guidance remained product-neutral and did not push trustees toward specific strategies or approaches.
Aware Super made four further recommendations:
- Include in the terms of reference for the Quality of Advice Review the role of intrafund advice as a mechanism for delivering high quality, affordable advice to members, including for members approaching, entering and living in retirement;
- Ensure the implementation of the consumer data right for superannuation allows members to provide their super fund access to appropriate MyGov, Australian Taxation Office (ATO) and Centrelink data to support retirement planning;
- Prioritise systems and processes to allow for aggregated, deidentified member data to be provided to superannuation funds from key Government agencies, in particular the ATO and Centrelink; and
- Explore options for other existing research, such as the household, income and labour dynamics in Australia (HILDA) survey, to be used to provide data sources for broader research on retirement policy issues.