APRA welcomes collaboration with industry on retirement income solutions

In a speech at the Australian Financial Review Super and Wealth Summit on Monday (22 November), APRA deputy chair Helen Rowell addressed government’s incoming retirement income covenant – which will require funds to have a retirement strategy in place for its members – and said the regulator is already considering changes to the framework, however will not act on it until more is known once the covenant takes effect in 2022.

“APRA will instead continue to engage with the wealth management industry on these issues,” Ms Rowell said.

“We continue to make clear that APRA is thinking carefully about what might be needed in terms of guidance, but we don’t plan to issue extensive or detailed guidance on the covenant in the short-term.

“We want to allow time for industry thinking and approaches to develop.”

However, Ms Rowell said that APRA will “collect and publish insights” from data to help industry better understand members’ needs.

“As the market evolves, APRA will be keen to support the industry through sharing examples of better practice to further assist the development of new products,” she said.

APRA estimates that in the next 10 years, 3.6 million Australians will move from the accumulation phase to retirement phase of superannuation with around $750 billion in aggregate retirement savings.

Ms Rowell said that despite the size of the market there are not many products available and demand is low.

To address this, Ms Rowell said industry must work with consumers to better understand their needs and motivations.

“They need the boldness to innovate, but the caution not to take unnecessary risks or create unnecessary complexity in managing retirees’ nest eggs,” she said.

“Above all, they need to help change hearts and minds around why Australia mandates retirement savings. If the purpose is to provide an income in retirement, then a much stronger focus on delivering for retirees in the retirement phase is needed.”

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.