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The Government has confirmed it is moving ahead with progressing the Retirement Income Covenant which was deferred last year to 1 July, 2022.
Speaking at the Conference of Major Superannuation Funds (CMSF), Minister for Superannuation, Financial Services, and the Digital Economy and Minister for Women’s Economic Security, Jane Hume, said the purpose of the retirement income system was to provide income in retirement and smooth consumption between working life and retirement.
Hume said the covenant would require trustees to have a strategy to generate higher retirement incomes for members.
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Soon every super fund will have to provide a retirement solution to their members which sits alongside their existing account-based pension offerings. The impact on the financial advice sector will be significant.
While the controversial Your Future, Your Super reforms may be grabbing most of the headlines, government retirement policy for super funds is taking shape. The key policy instrument will be the Retirement Income Covenant (RIC), which will formalise requirements for super funds to provide retirement solutions for their members which provide regular income payments for life. The RIC is scheduled to take effect on 1 July 2022.
The range of retirement solutions offered by super funds is likely to be large. Some funds may white-label external annuity products. Others may create pooled solutions which bring confronting terminology such as group-self annuitisation. All these solutions could be offered in either lifetime or deferred (whereby income payments begin at a deferred a
Banding together on retirement advice
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Players across the retirement income industry have come together to work on a better system for advisers and Australians at the end of their working lives, as the industry shifts and cash rates stay low.
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The Retirement Income Review had a lot of insights, but perhaps most importantly for advisers, it acknowledged the importance of accessible advice in helping retirees navigate the end of their working lives. A lack of financial literacy and a highly complex system mean that the average Australian can find themselves lost, in need of better information and affordable advice tailored to their needs.
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