The Morrison Government has today legislated a new retirement income covenant when the Parliament passed the Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021, meeting its commitment to enact this new superannuation covenant. The new covenant will require trustees to have a retirement income strategy that outlines how they plan to assist their members in retirement. Current legal obligations of superannuation trustees have focussed primarily on the accumulation phase and there are no obligations to consider the needs of beneficiaries in retirement. The retirement income covenant will address this gap.
A trustee’s retirement income strategy must consider how they will assist their members to balance maximising their retirement income, managing risks to income and having some flexible access to savings. It will give retirees the confidence to spend their superannuation savings, while enabling choice and competition in the retirement phase of superannuation.
The covenant will require trustees to have their strategy formulated in writing and a summary publicly available from 1 July 2022, however they are not required to give effect to all components of their strategy by this date. Instead, strategies are expected to evolve and develop over time, and it has always been expected that superannuation trustees should consider the retirement needs of their members. The covenant codifies this existing expectation.
Trustees have known that the covenant has been coming for over three years and the Government has undergone extensive consultation on the retirement income covenant, so industry should be well‑placed to begin developing and publishing their retirement income strategies by 1 July 2022.