Treasurer Jim Chalmers has released two consultation papers, which will form two key planks of the government’s retirement phase reforms to improve choice, guidance and products for members in retirement.
The government is seeking views from the superannuation sector and broader community on best practice principles for superannuation retirement income solutions.
These principles will guide the superannuation industry in designing modern, high-quality retirement products that help deliver income in retirement.
The other consultation paper will explore how a new reporting framework on retirement outcomes could enhance transparency and create a better understanding of success in retirement phase. APRA will be responsible for collecting and publishing the data required by the framework.
Chalmers said the principles and framework build on the obligations introduced by the Retirement Income Covenant and work in tandem with the government’s Delivering Better Financial Outcomes package.
The consultation paper on creating best practice principles for superannuation retirement income solutions said the principles will complement and build on existing trustee obligations under the current legislative and regulatory framework.
“While the principles do not replace, override or vary a trustee’s obligations under existing laws, they are intended to be clear and practical guidance on how a trustee can adapt their retirement phase offering to the composition of a fund’s membership,” it said.
The principles will encourage trustees to proactively engage with members to learn more about their retirement needs and develop at least three distinct cohorts for the purposes of developing retirement income solutions, according to the consultation paper.
“Trustees may choose to incorporate other characteristics into their cohorts based on their engagement with members or other available research and relevant data,” it said.
The consultation paper also explored how retirement income products could be better designed to maximise income for members, with many members reaching life expectancy age with the majority of their assets unspent.
“With a large proportion of retirees drawing at the minimum drawdown rate, which leaves around two-thirds of assets unspent by life expectancy, current settings are not effectively supporting retirees to maximise their income and their living standards,” it said.
There is scope for retirement income solutions to better support members to achieve higher living standards while balancing the objectives of the Retirement Income Covenant, it said.
The other consultation paper is seeking views on what indicators and metrics should be used to create a meaningful reporting framework that will ultimately help drive transparency and improved retirement outcomes.
“It is important that there is as much of a focus from trustees on retirement outcomes for their members as there has been on high investment returns in the accumulation phase,” it said.
Once the government has determined the metrics to be published, APRA will undertake consultation on how to give effect to the collection and publication of these indicators and metrics.
“Over annual publications from 2028 onwards, the framework will measure industry progress at building their understanding of retired members, motivate continued innovation in retirement income solutions, and drive uplifts in member outcomes in the retirement phase of superannuation,” the consultation paper said.
The framework will sit alongside the Retirement Income Covenant’s principles-based obligations and the new requirements introduced in Prudential Standard SPS 515: Strategic Planning and Member Outcomes, which commenced on 1 January 2025.
“Importantly, the framework is not a performance test and as such, there will be no legislated consequences associated with any level of performance,” the consultation paper said.
“Rather, the framework will be an important tool to help drive engagement with the retirement phase, similar to the Australian Taxation Office’s YourSuper comparison tool, ASIC’s Moneysmart website and APRA’s Comprehensive Product Performance Package for the accumulation phase.”
