New legislation requiring superannuation funds to play a more active role in supporting members to generate maximum retirement incomes, has been welcomed by older persons peak body Council on the Ageing (COTA) Australia.
Currently retirees can access their superannuation after turning 60 with no real idea of how to get the best retirement income while managing risks, and with little or no guidance from their fund.
The legislation will require all superannuation funds (excluding self-managed funds) to develop and publish a retirement income strategy for members by July 1, 2022 and then commence implementing that strategy under scrutiny from regulators.
This is a first and very important step toward a more central focus on increasing retirement income within our superannuation system, which was endorsed by the Retirement Income Review.
COTA has strongly advocated for the introduction of a Retirement Income Covenant.
"Many people create a superannuation nest egg and try to just live off its earnings, reluctant to draw down on their funds that would support a much improved quality of life in their retirement. Research shows for many, their nest egg grows, keeping it untouched, or at best shrinks only a little, and it becomes a bequest," said COTA Chief Executive Ian Yates.
"A key factor contributing to this has been the focus of the superannuation system being almost exclusively on accumulation, which has also been the bulk of funds' interactions with their members.
"While superannuation funds have a responsibility to optimise the "nest egg", they have an equal responsibility to ensure that when the egg is hatched the funds have products and services that support the optimum quality of life and dignity of their members in their retirement.
"The Retirement Income Covenant focuses on getting funds to rebalance their planning and advice equally on the accumulation and retirement phases, ensuring the system works as it was intended," said Mr Yates.