The urgency with which superannuation funds must develop retirement income solutions has been driven home by new research commissioned by AMP that shows half of all Australians are financially insecure about retirement.

With 2.5 million people expected to retire in the coming decade, the Retirement Confidence Pulse research released this week suggests a large proportion of them are approaching that milestone with significant trepidation. The journey to retirement can take many paths.

The twin regulators of superannuation, ASIC and APRA, have been urging funds for the better part of the past three years to move faster on meeting their obligations under the Retirement Income Covenant, introduced in July 2022 as a mechanism to shift funds’ attention from providing accumulation solutions to providing decumulation solutions.

But APRA deputy chair Margaret Cole told the Retirement Leaders Summit in Canberra in August that some funds had quite plainly heard the “clarion call” of RIC obligations more clearly and with greater urgency than others; while ASIC Commissioner Simone Constant told the same event that “while we are seeing some green shoots, it’s clear there are leaders and laggards” and that, from the perspective of a regulator whose focus is on fostering confidence in markets, “that’s a real problem”.

Given that all trustees have the identical obligations to deliver on the RIC – regardless of size of fund, composition of membership or any other circumstances they might believe diminish their responsibility – the disparity in responses to date reflects poorly on the ability of some trustees to grasp the issues and drive the necessary changes in the organisations they oversee.

Fallen short

Cole told the summit that ASIC and APRA research shows some trustees “have fallen short in tracking and measuring the success of their retirement income strategies”. And anything that can’t be measured can’t be managed.

The variation in the quality of retirement solutions – at least, how those solutions are experienced by members –  is also borne out in research By CoreData and Conexus Financial, the publisher of Retirement Magazine.

CoreData founder and global chief executive Andrew Inwood says other aspects of superannuation are delivered far more consistently. For example, costs across the industry have been driven by competition into a relatively narrow band; and the Your Future Your Super performance test means you can also throw a blanket over funds performance-wise.

Now AMP’s research illustrates starkly the impact that a lack of effective, widespread action on retirement solutions across the industry is producing another reasonably consistent outcome – and not a positive one.

One of the most sobering messages in the research is that confidence in retirement is not correlated with age: people of all ages lack confidence. There are some “clear red zones” in the confidence of those aged 40 to 49, and there is also “too much amber” among those aged over 65, the research says. Confidence is highest among higher income-earners – those earing above about $135,000.

Retirement is indeed complex, the research shows. It’s been said that while accumulation is a relatively homogenous experience, the retirement experience is heterogenous, and the AMP research gives an insight into why.

There’s a gender gap, with two in five women feeling confident about retirement compared to three in five men. People in a couple are more confident than singles. Only three in 10 divorced women feel confident, compared to five in 10 men. Single mums are among the least confident of all cohorts, with only one in five feeling confident. And Australians in their 40s – the so-called “sandwich generation”, dealing with the expenses of looking after both their children and their parents – are the least confident of all age groups, with only two out of five saying they’re confident, reflecting the burden of other financial commitments typically experienced at this age.

A deeper, more comprehensive response to RIC obligations across the industry won’t address the rate of divorce, or income inequality, the challenges of looking after aging parents or housing affordability.

But it doesn’t help the situation one bit when a member arrives at the point of retirement and their fund can’t help them make the decisions they need to make to get set up for their best possible retirement.