APRA chair Wayne Byres said the incoming Retirement Income Covenant (RIC) – which will require superannuation trustees to plan and outline a retirement strategy for members – will aim to fix an “imbalance” that currently exists for superannuation fund members.
Speaking at the Trans-Tasman Business Circle event on Thursday (23 June), Mr Byres said the superannuation sector is not equipped to deal with the current “significant demographic shift”.
“An ever-growing number of members shift each year from the accumulation to the retirement phase, only to encounter a lack of accessible financial advice or suitable products to help manage their nest eggs for potentially decades to come,” he said.
“The covenant aims to change that imbalance.”
Mr Byres continued: “Over coming months, we will undertake a thematic review of those strategies, and release the findings in due course, along with examples of better practice, to assist industry to continue to evolve and strengthen their role of supporting their members in this phase of their superannuation journey.”
Mr Byres’ comments come after ASIC recently confirmed that the (RIC) will not prevent registrable superannuation entity (RSE) licensees from offering financial product advice.
In a joint set of frequently asked questions (FAQs) released alongside APRA earlier this month, the corporate regulator confirmed that licensees’ strategies can cover the provision of financial product advice.
“While an RSE licensee is not required to offer financial product advice as part of its retirement income strategy, the retirement income covenant does not prevent the RSE licensee from offering financial product advice (including personal advice), so long as the RSE licensee (or the entity providing the advice) is licensed to provide the advice, and is operating within the existing financial advice framework,” the corporate regulator said earlier this month.
On a recent episode of the ifa Show podcast, Challenger general manager of retail distribution, Luke Cheetham, said the RIC will present a huge opportunity for financial advisers.
“We work in a highly complex retirement system and you couple that with a lack of understanding of the risk that many will face over a 20 to 30-year retirement, it really means that transitioning from work to retirement without the right guidance [and] without the right advice can be a really daunting prospect for many,” Mr Cheetham said.
Listen to the full podcast with Mr Cheetham here.
The RIC will take effect from Friday, 1 July.
