The Turnbull Government is progressing reforms announced in the 2018-19 Budget to secure the retirement incomes of Australians and improve their standard of living in retirement.
Building on the expert input of an industry advisory group announced in February this year, the Minister for Revenue and Financial Services, the Hon Kelly O'Dwyer MP, has today released a position paper outlining the proposed principles underpinning a retirement income covenant. This covenant would, for the first time, require trustees to help their members meet their retirement income objectives.
"For too long superannuation has been focused only on accumulating savings. A retirement income framework is a pivotal part of the Government's reform agenda for superannuation – an agenda squarely focused on protecting and improving outcomes for superannuation members," Minister O'Dwyer said.
The new covenant will form the cornerstone of the new framework. It will be added to the Superannuation Industry (Supervision) Act 1993, which will elevate the consideration of members' retirement income needs to sit alongside the other fundamental obligations of trustees, such as the investment, risk management and insurance needs of their members.
"To fulfil the overarching purpose of superannuation, it is essential that trustees develop a retirement income strategy and consider the retirement income needs of their members" Minister O'Dwyer said.
The framework will also include supporting regulations that oblige trustees to offer their members a comprehensive income product for retirement (CIPR) and to guide and support members to select the right retirement solution.
The Government is prioritising the retirement income covenant and supporting regulations as the first phase of the retirement income framework. The disclosure metrics, also announced in the Budget, are another crucial part of the framework to better inform consumers and aid comparison of retirement products.
The Government is currently developing disclosure requirements and expects to consult on a detailed proposal later in the year.
"I would like to thank the advisory group and all stakeholders for their contributions on the development of the retirement income framework and I look forward to their ongoing engagement," Minister O'Dwyer said.
The position paper is available on the Treasury website. Interested parties are encouraged to provide submissions on the proposed covenant principles by 15 June 2018.