Last week, the federal government launched what it called the “next step in reforming and improving the retirement phase of superannuation”.
This took the form of a pair of consultation papers on retirement phase reforms: the best practice principles for superannuation retirement income solutions and the retirement reporting framework.
“As our economy changes, population ages and the super system evolves, more and more Australians will draw down on bigger pools of savings that they will rely on for longer. We are living longer and healthier lives and more than 2.5 million Australians are expected to retire within the next decade,” Financial Services Minister Daniel Mulino and Treasurer Jim Chalmers said in a joint statement.
The principles are aimed at guiding the superannuation industry in designing “modern, high-quality retirement products that help deliver income in retirement”, while the reporting framework is designed to offer members “greater transparency and create common understanding” around the retirement phase.
According to Financial Services Council (FSC) chief executive Blake Briggs, the consultations are an important step forward in improving retirement outcomes for Australians.
“No two people’s retirements are the same and should not be treated as such by the government or superannuation funds,” Briggs said.
“Retirement policy should focus on ensuring that people are given the tools to make decisions that steer them towards the kind of retirement that they want, this includes access to guidance, financial advice and a range of products to help shape their futures.”
He added that the FSC was “pleased” that Treasury had framed the principles around more emphasis on these individual outcomes, adding it is “vital to ensure people have choice when it comes to choosing their superannuation and empowers them to select investment strategies that align with their financial goals and personal values”.
In the consultation papers, Treasury noted that the principles would “work alongside” ongoing Delivering Better Financial Outcomes (DBFO) reforms.
It particularly noted that the proposed legislation will “assist trustees to service members in retirement by providing clear rules on what advice topics can be collectively charged for via superannuation and allowing trustees to provide targeted prompts to members”.
The paper added that trustees engaging with advised members “may be more complex”, as these members would already receive a high degree of tailoring.
“The principles call for trustees to ensure that their suite of products and product settings are appropriate for the characteristics of their members and member cohorts, which includes advised members,” the paper said.
“Whilst recognising the benefits to the member from an advised relationship, the principles suggest trustees have scope to support advised members to achieve positive outcomes by including advised members in member engagement efforts with members approaching retirement, including information on the trustee-designed retirement income solutions and products available through the fund.”
Turning to transparency, the FSC cautioned the government that extending the performance test to retirement products would be fraught given the significant variation in investment portfolios depending on their retirement goals.
“Performance testing of retirement products would lead to adverse outcomes, given that retirement is personal and should not be treated uniformly,” Briggs added.
