Date posted: 22/10/2021

Joint Submission on Retirement Income Covenant

Joint submission rejects need for super fund retirement income covenant

Chartered Accountants ANZ and CPA Australia believe that the proposed Retirement Income Covenant is unnecessary.

The joint accounting bodies believe the proposed covenant will add to the costs of running superannuation funds but will be of little or no practical benefit to fund members, trustees, regulators or the government.

Contrary to the assertions made by Treasury in the past Australian Prudential Regulation Authority (APRA) data shows that retirees deplete their superannuation retirement savings in retirement.

We do not support the proposed new covenant for several reasons:

  1. The complexity of retirement planning results in a process which is convoluted and difficult for many to navigate.  Consequently, we believe that it would be more efficient for this process to be streamlined and simplified prior to subjecting trustees to increased compliance costs.
  2. We disagree with the assertion in the exposure draft explanatory memorandum that, “current legal obligations of superannuation trustees have a focus primarily on the accumulation phase and there are no specific obligations to consider the needs of beneficiaries in retirement”.  The proposed Retirement Income Covenant requirements are already contained in obligations with which trustees must comply, including but not limited to, general trust law obligations, the best financial interests duty (BFID), the sole purpose test, requirements regarding the formulation and maintenance of investment strategies and the new Design and Distribution Obligations (DDO) .  We are concerned that requirements for trustees to consider their members’ non-superannuation investments is beyond their remit.
  3. The recommendations requiring trustees to provide appropriate guidance to their members is likely to create a substantial additional compliance costs burden.  In addition, a grey area is created where what policy makers may consider is general financial product advice may be perceived by members as personal financial product advice.  This may conflict with existing member engagement strategies, as well as business planning at the trustee level.

Retirement Income Covenant - September 2021

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