Following the release of the retirement income covenant position paper on 19 July 2021, the Government released draft legislation and explanatory material on the proposed retirement income covenant on 27 September 2021.
In line with the 2018-19 Budget, the Government intends to introduce a retirement income covenant in the Superannuation Industry (Supervision) Act 1993 which outlines a fundamental obligation of trustees to formulate, review regularly and give effect to a retirement income strategy.
The retirement income strategy will outline the trustee’s plan to assist their members who are retired or approaching retirement to achieve and balance the following objectives:
- maximise their member’s retirement income;
- manage risks to the sustainability and stability of their retirement income; and
- have flexible access to expected funds during retirement.
The covenant also includes obligations to:
- take reasonable steps to gather information necessary to inform the formulation and review of the strategy;
- record the strategy in writing;
- record a range of matters as part of the strategy; and
- make a summary of the strategy publicly available on the fund’s website.
It is proposed that the covenant will not apply to self managed superannuation funds (SMSFs) or small APRA funds (SAFs). This is a change from the position paper of 19 July 2021 which indicated that the covenant would apply to all superannuation funds, including SMSFs and SAFs.
Stakeholders are encouraged to provide feedback. The consultation period closes on 15 October 2021.
Further information
Treasury of Australia, Explanatory materials and exposure drafts, 27 September 2021
Treasury of Australia, Position paper, 19 July 2021