As the Retirement Income Covenant (RIC) has implications for financial advice, guidance is needed about the boundaries between the provision of factual information and general advice, according to the Australian Institute of Superannuation Trustees (AIST).
AIST’s submission to the RIC exposure draft legislation said while it supported a principles-based RIC, it recommended consequential legislative and regulatory changes.
The changes included:
- The Australian Securities and Investments Commission (ASIC) should update their guidance about the boundaries between the provision of factual information and general advice in relation to the RIC, and the explanatory memorandum (EM) foreshadow this;
- The legislation should explicitly provide protection from liability for a fund where a higher drawdown rate was a part of properly constructed and compliant retirement income strategy;
- The EM should foreshadow the extension of intra-fund advice to allow the provision of advice on how a member might best provide for their retirement, including consideration of household’s retirement adequacy, Age Pension eligibility, non-superannuation assets, and income. The Government should announce legislation to support such an extension; and
- The explanatory material should reiterate that a super fund is able to offer members general advice about retirement product options without breaching anti-hawking legislation, and that the Government expects that ASIC would be issuing guidance and parameters within which this could occur.
On how retirees chose to access their retirement balances, AIST said the EM needed to confirm that retirees, and especially those with modest levels of retirement savings, were not precluded from accessing these as a lump sum.
AIST also noted the legislation needed to state that trustees would have regard to the needs of Aboriginal and Torres Strait Islanders in their retirement income strategies and development of cohorts.
The requirement for trustees to make every determination made about their strategy public was unnecessarily onerous and should be removed, AIST believed.
It was also recommended that:
- Safe harbour protections should be provided to super funds;
- A data-sharing framework be created for government agencies to assist trustees to meet their obligations;
- A flexible implementation period, where the requirement for a retirement income strategy would be voluntary for the first 12 months from 1 July, 2022, then mandatory on 1 July, 2023; and
- The EM should foreshadow the Government’s intention to have defined and consistent retirement income product labels and standardised disclosures.