Final versions of the Best Practice Principles (BPP) and Retirement Reporting Framework (RRF) have now been released following Treasury’s consultation process and further industry engagement. We’ve waited with interest for this final release, excited by the potential uplift that the two initiatives might deliver

Overall, it is good to see expectations being set through the BPP and data collection expanded under the RRF. What remains missing is a strong industry nudge, in particular plans to connect through to “official” assessment of super fund retirement income strategies (RIS) and create consequences for falling short.

BPP is in good shape

We are very positive on the final version of the BPP. The principles can be broken into five categories for trustees to focus on:

1. Understand their members and their retirement income needs
2. Build products and settings that support effective retirement income solutions
3. Combine products and settings to create solutions for different groups of members
4. Engage members so they can make informed decisions in retirement
5. Review and improve their retirement income solutions over time

The final version of the BPP is little changed from the consultation paper, which was informed by broad consultation. One misgiving, which was always the case, is that the BPP is voluntary with no clear translation through to APRA regulatory standards and oversight. It remains to be seen how much real traction they will have.

RRF progressed from initial consultation

The RRF was always a more difficult initiative. Collecting data on product offerings (likely to be significantly divergent), service offerings (always hard to measure) and member activities is hard enough. But measuring member outcomes in retirement when they are delivered to individuals over decades is a major challenge.

Our submission advocated for two things. First was that the RRF be connected to the BPP, and thus shed light on how well funds are meeting the aspirations set out therein. Second was to set the bar high but afford funds ample time to build their systems and comply. 

The RRF outcome was a bit of both, providing a meaningful uplift in the breadth of data collected commencing in 2027 with annual publication from 2028. The type of metrics to be collected include:

1. Retirement products: offerings (including lifetime income streams) and features
2. Personal advice services: offerings and member take-up
3. Take up of retirement products by members
4. Payment activity of members

However the RRF only partially aligns with the BPP categories listed above.

Could the RRF have gone further?

We would have liked the RRF to have gone further, but imagine that multiple constraints were at play including:

1. Ability of APRA to collect more nuanced data especially around services, where a degree of subjectivity may be required.
2. Constraints providing certain data may have led to industry pushback in some areas. In our view most funds should be able to provide the required data points now, questioning the need for such a delay in collecting the metrics.

By comparison, the criteria for the Epic Retirement Tick produced by Chant West highlights the feasibility of collecting a broad range of objective data points and evaluate fund RIS. 

Where will tougher assessment come from?

The RRF is not framed as an assessment framework. It will not distinguish between funds with well-developed and under-developed RIS. Metrics will vary with fund membership profiles and offerings, making comparison difficult. 

The BPP and RRF will act as modest prompts for funds to enhance their RIS. However, they are hardly strong nudges. As seen through the APRA Heatmaps, transparency alone can have minimal real impact, which only arrived with the YFYS performance test. 

In our view the strongest nudge at present is the Epic Retirement Tick. Only a small number of funds currently have a tick, and we are hearing of others responding by trying to get their own ‘gold star’. 

Assessment remains a key missing piece

In a recent thought piece we highlighted that retirement policy and regulation needs to focus on four areas:

1. Enablement
2. Expectations
3. Assessment
4. Consequences

We can see policymakers focusing on enablement (for instance DBFO Tranche II), and policy initiatives like the BPP make expectations clearer. What is missing is any sign of an ‘official’ assessment regime being developed. Indeed, the Government seems to be explicitly dodging the issue, if these statements in the BPP and RRF releases are any guide: 

“No enforcement action will be associated with trustees’ adoption of these principles.”

“The Retirement Reporting Framework is a transparency reform. This new reporting framework will not introduce new consequences or penalties for superannuation trustees.”

Yes, assessment is challenging. Yes, it is likely to require a degree of subjectivity – we think assessment should incorporate a focus on the fund capabilities to deliver a quality RIS.

History shows that assessment is needed to get the super industry stretching to reach good outcomes in good time. Steps taken to ensure passing the YFYS performance test and the responses to the Epic Retirement Tick initiative we hear about are cases in point.   

In the absence of an official assessment regime – and ideally consequences for not coming up to standard – RIS development may proceed at a pace that works for funds themselves rather than their members. 

The Conexus Institute is a not-for-profit think-tank philanthropically funded by Conexus Financial, the publisher of Retirement Magazine.