APRA deputy chair Helen Rowell has warned superannuation fund trustees not to delay meeting their obligations in designing suitable retirement income products for members.
Rowell said all trustees have a duty to produce adequate retirement income for members but accepted that some trustees were holding off with products until they saw the legislation relating to the Retirement Income Covenant and comprehensive income products for retirement (CIPR)
In last year’s Federal Budget, the government introduced the Retirement Income Framework and the accompanying “retirement income covenant”, which would, for the first time, require super trustees to help members reach their retirement income objectives by offering a CIPR.
“There is no need to wait for legislation, standards or guidance – you have to act now to meet the needs of members in post-retirement,” Rowell said at Investment Magazine’s Retirement conference in Sydney on Tuesday.
“Our view is trustees already have obligations in this area and so delay may not be the most appropriate course of action.”
The deputy chair of the prudential regulator stressed that retirement should be high on the agenda of all trustees.
This is especially the case, she went on to say, when people are moving from accumulation to drawdown phase in increasing numbers.
Moreover, she added, an increasing proportion of retirees are opting for pensions rather than lump sums so that means there is a significant onus on trustees to provide members with good outcomes throughout their life.
Post retirement products should get the same level of scrutiny and attention by trustees as pre-retirement phase products and options, she continued.
“I find it surprising in some ways that that provision of retirement income through a member’s life isn’t a key focus of the superannuation industry. If super isn’t about retirement, I’m not sure what it is about.”
Rowell said the design of post retirement products, monitoring their performance and improving them on an ongoing basis, will be integral to fulfilling the requirement of the Member Outcomes prudential standard.
The Members Outcome Bill – which will expand APRA’s powers in cases of breaches of obligations to members – has not yet passed Parliament.
One barrier has been cleared however. A new test for longevity products applies for products purchased after July 1 this year changes how the value of longevity products is assessed for the age pension assets and income tests.
From July onwards, annuities will be assessed only at 60 per cent of their purchase price for at least five years or until the owner reaches age 84.