Super funds urged to do more to help members with retirement strategies
Super funds members ‘deserve better’ in terms of assistance with their retirement strategies, APRA deputy chair Margaret Cole says.
Superannuation funds have been urged to lift their game when it comes to helping members with their retirement strategies.
Two years after the formal start of the Retirement Income Covenant, funds have warned financial regulators that uncertainty around regulation, lack of member engagement and costs has limited their ability to develop strategies to help members move into retirement.
In a joint statement issued on Tuesday, the Australian Prudential Regulation Authority (APRA) and the Australian Securities & Investments Commission (ASIC) warned of a “lack of urgency” by super fund trustees in their focus on the retirement outcomes of members.
The regulators said a survey of super fund trustees showed that there was a lack of attention by funds in tracking and measuring the impact of their strategies to improve retirement outcomes for members.
APRA deputy chair Margaret Cole said super fund members “deserved better” in terms of assistance with their retirement strategies.
“The most concerning finding from this survey is the lack of progress being made by trustees in tracking the success of their strategies, especially as this was highlighted as one of the key areas in need of improvement in the thematic review report,” she said.
“Without effective success metrics, how can trustees know that their strategies are working?”
ASIC Commissioner Simone Constant said super fund trustees had a “pivotal role to play in improving retirement outcomes for their members”.
She said three million Australians expected to become eligible to access their super as they moved into retirement over the next decade.
This would be in addition to the six million already eligible to access their super savings.
She said the trustee responses to the survey showed that they were “pushing ahead with work to refine their strategy implementation (on retirement income strategies).
“However, we expect trustees to assess gaps and identify opportunities to accelerate progress in closing these gaps, including by leveraging examples of progress outlined in this industry update.”
The survey was part of a follow-up by the two financial regulators on funds’ responses to the Retirement Income Covenant.
It comes as an increasing proportion of super funds are being held in retirement products as the Australian population ages.
Funds held by super funds in retirement income products were a record $426bn at the end of December – up by $34bn over the previous two years.
The survey showed that super funds with a greater proportion of members in retirement had “generally made more progress” in their retirement strategies than funds with a higher proportion of working age members.
The survey showed that while three-quarters of super trustees said measuring retirement outcomes was a priority, there had only been “incremental progress” in measuring and tracking retirement income strategies.
Only eight trustees said tracking the effectiveness of retirement-focused assistance to members was a priority.
Only five areas of planned improvements in strategies are expected to be completed by mid-2024.
The regulators said the responses from trustees pointed to several challenges in implementing the covenant. These included uncertainty around the financial advice framework, privacy, security, cost concerns on collecting more member data, and a lack of member engagement and financial capability.
“Given the large number of superannuants moving into the retirement phase in future years and the growing of account balances transitioning into retirement, continued focus on the retirement phase is critical,” the report said.
Originally published as Super funds urged to do more to help members with retirement strategies
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