SMSFs would be required to develop a Retirement Income Strategy under changes to superannuation being developed by the Government.
The Government has released a position paper on the Retirement Income Covenant, which would require super funds – including SMSFs – to develop a Retirement Income Strategy for members.
“For too long superannuation has been focused only on accumulating savings. A retirement income framework is a pivotal part of the Government’s reform agenda for superannuation – an agenda squarely focused on protecting and improving outcomes for superannuation members,” said Minister for Revenue and Financial Services Kelly O’Dwyer.
“To fulfil the overarching purpose of superannuation, it is essential that trustees develop a retirement income strategy and consider the retirement income needs of their members.”
This follows from an announcement in the 2018 Budget that the Government intends to amend the SIS Act to “introduce a retirement covenant that will require superannuation trustees to formulate a retirement income strategy for superannuation fund members”.
The Retirement Income Covenant is part of the Comprehensive Income Product for Retirement (CIPR), which was a recommendation of the Financial System Inquiry (FSI) to require super funds to pre-select a retirement income option for members. The Government has been slowly progressing CIPR since it was recommended by the FSI in 2014.
According to the position paper the only part of the Retirement Income Covenant that would apply to SMSFs is the requirement for a Retirement Income Strategy.
In terms of the broader Retirement Income Framework, the Government plans to prioritise progress of the Retirement Income Covenant, followed by simplified and standardised disclosures for retirement products, then retirement income projections and finally the regulatory framework.
The superannuation industry has criticised CIPR as “neither necessary nor sufficient”, as currently designed, to meet its goals.