Welcome and introduction
Co-chair David Knox opened the meeting and introduced Adam Hawkins and Jordan George from Treasury to lead the discussion on the Retirement Income Covenant (RIC).
Retirement Income Covenant
Treasury is seeking stakeholder views on exposure draft legislation that was released for consultation on 27 September 2021 and will introduce a retirement income covenant for superannuation trustees.
Subject to the passage of legislation, the retirement income covenantExternal Link will take effect from 1 July 2022. Consultation closes 15 October 2021.
The draft legislation will codify the obligation for superannuation trustees to have a retirement income strategy that outlines how they plan to assist their members in retirement.
The strategy must consider how the trustee will assist their members to balance maximising their retirement income, managing risks, and have some flexible access to savings.
The exposure draft reflects the feedback received following the release of the retirement income covenant position paper earlier this year including:
- SMSFs will no longer be subject to the covenant
- Inflation risk is now a consideration as part of the covenant
- Defined benefits members that can commute their balance to a lump sum must be considered as part of the strategy.
The Superannuation Industry Stewardship Group members provided feedback and comments on a number of areas including:
- concerns about the language used in the covenant, recognising that the proposed approach is very different to the Trustee’s traditional role
- concerns about limited public data sources available to trustees to assist them cohort their membership and to what extent they would be liable or offered safe harbour/indemnity if they formulated a strategy based on limited resources available to them
- clarity over whether the focus of the strategy was for higher incomes across all cohorts or different drawdowns strategies for different cohorts – Treasury confirmed it was the latter.
- opportunities to access rich data sources on super fund members that ATO has (for example, non-personalised data sets of their membership) – Treasury acknowledged that it was something that could be looked into as part of continuing superannuation policy development.
Treasury asked members to include specific information in their responses and submissions to inform Treasury about needs, gaps or additional legislation that industry feels is needed to enhance the retirement space.
Consultation on the RIC closed on 15 October. Treasury expects legislation will be introduced into parliament at the end of the 2021 calendar year.Information about the key topics discussed at the Superannuation Industry Stewardship Group meeting 7 October 2021.