The introduction of the Retirement Income Covenant should not be viewed as a “compliance exercise” by superannuation funds, according to Australian Prudential Regulation Authority (APRA) member Margaret Cole.
In a speech to the Financial Services Council, Cole acknowledged it was early days yet for funds to have formal plans, given the rules came into force on 1 July.
However, she urged funds to “move swiftly” to put a plan in place as it would take the whole industry to make significant progress in areas such as advice and product suitability.
“While it is clearly early days in terms of the formal requirement for trustees to have documented plans, this must move swiftly to be more than just a compliance exercise. The reality is that superannuation members are retiring every day, and supporting members to ensure they are best positioned as they move beyond the accumulation phase of superannuation is an imperative.”
Several of Australia’s largest super funds had already outlined what their plans would be as its members moved into decumulation phase and Cole said these were being reviewed with the regulator and results would be published later this year.
“We also intend to publish examples of better practice to assist industry to continue to evolve and strengthen its role of supporting their members in this phase of their superannuation journey,” she said.
Cole also touched on the ongoing consolidation activity in the space and said she expected further fund closures to come.
“ With the industry still at 145 APRA-regulated funds, of which 105 collectively manage less than 9% of assets, I can say that it is our view that the optimal size of the industry remains a fair distance from where we are now.
“You can expect our push to eradicate unacceptable product performance to continue by intensifying pressure on trustees to cease offering high-fee, poor performing products, and through further scrutiny of the Choice sector.”
