Retirement income covenant – key insights for superannuation trustees

With the release of the long-awaited position paper on the Retirement Income Covenant, trustees are on notice that, depending on the passage of legislation, their retirement income strategy for fund members may need to be in place by 1 July 2022.

The paper sets out three key objectives for the covenant and, given these may compete with each other, trustees will need to work out how to balance these when assisting their members. The strategy can either be for all members generally or for different cohorts and there is an emphasis on the use of data to drive this.

This issue of Super Update gives an overview of the position paper, the role played by the age pension, and the proposed requirement for trustees to help members access suitable retirement solutions without breaching the financial advice rules and best financial interests obligations.

We also look at the release of the 2021 Intergenerational Report, where the outlook has been profoundly affected by COVID-19. A key insight for superannuation is that the proportion of older Australians receiving a full age pension is expected to decline, while more people are likely to be eligible for a part pension. The government has also published a discussion paper on options to reform the provision of proxy advice to super funds.

Our news in brief includes the extension of the reduced income stream drawdown limits, a draft prudential practice guide on remuneration and the final financial sector levies for 2021-22. As usual we include a legislative update, the latest APRA statistical publications and guide to key changes.