The Treasury has released a position paper on the Retirement Income Covenant which outlines a pathway to further develop the retirement phase of superannuation.
The Covenant is a key stage of the government’s retirement income framework. The Covenant will codify the requirements and obligations for superannuation trustees to improve retirement outcomes for individuals, while enabling choice and competition in the retirement phase.
Subject to the passage of legislation, trustees will be required to have in place a retirement income strategy as outlined in the position paper from 1 July 2022.
Retirement income strategy
Trustees have to develop a strategy outlining their plan to assist their members to achieve and balance the following objectives:
- maximise their retirement income
- manage risks to the sustainability and stability of their retirement income; and
- have some flexible access to savings during retirement.
Requiring trustees to have a retirement income strategy ensures that they identify and recognise the retirement income needs of the members of their fund and have a plan to build the fund’s capacity and capability to service those needs.
The strategy should reflect a trustee’s broad understanding of their membership, either for the members of the fund as a whole or for cohorts of members. The characteristics of these cohorts are at the discretion of trustees but could be determined by factors such as superannuation balance, homeownership status, partnered status, or age of retirement.
The Retirement Income Covenant was introduced in the 2018-19 Budget and has deferred two years from its original start date of July 2020.
The government seeks feedback on the position paper. The deadline for the submission of feedback is 6 August.