The federal government is sounding out the possibility of introducing a MySuper-styled default product requirement, comparison tool and performance test package for super funds in the retirement phase, in a bid to ramp up the industry’s offerings for retirees.
In a 31-page discussion paper released on Monday, the Treasury outlined potential new policies in three areas of focus: helping members navigate retirement income, supporting funds to deliver better strategies, and making lifetime income product more accessible.
“We want to ensure super delivers on its foundational promise of providing a dignified retirement for more Australians,” said Treasurer Jim Chalmers and Minister for Financial Services Stephen Jones in a joint media statement.
One of them was a standardised “first offer” retirement product that will balance a set of desirable features, including around flexibility, risk management and income. It could include longevity protection measures such as deferred guaranteed income stream, or forward-planned income stream according to members’ preferences.
While acknowledging the default product won’t be suitable for all retirees, the paper said it should provide a solution for less engaged members while retaining choice for them.
Research from SMSF administration service provider Class presented in September showed roughly half of APRA-regulated fund members aren’t taking advantage of tax-exempt income streams in retirement, showing the need for options to help disengaged fund members move to a more appropriate retirement vehicle.
Meanwhile, a retirement product equivalent for the Your Future Your Super (YFYS) package is officially on the government’s agenda. It followed reported comments from APRA’s chair John Lonsdale during an industry roundtable earlier this year that with the YFYS’ success in the accumulation phase, a similar arrangement for retirement won’t be “that big a step”.
The paper listed the YourSuper comparison tool and the performance test as two effective ways in the accumulation phase to rule out underperforming products and funds and would help members make more informed choices.
However, the paper iterated that if both were to be established in retirement, the industry needs to establish better disclosure practices (including universal comparison metrics) and “careful assessment of the unique challenges present in the retirement phase”, such as liquidity and longevity risks.
If established, a standardised product disclosure framework will require funds to publish basic information on their retirement products (such as expected income and risk management) and performance elements (such as fees and investment performance).