The Australian Securities and Investments Commission (ASIC) has significantly cleared the way for superannuation funds to provide members with retirement estimates, according to financial services consultancy, Towers Watson.
The consultancy has pointed to updated guidance released by ASIC which it said represented a big step forward for trustees to be able to give their members a more complete picture of their potential retirement income.
The guidance makes it clear that superannuation funds can include the age pension amount in a retirement income estimate – something which Towers Watson argues is crucial.
"Until the Superannuation Guarantee system matures, the age pension will form the majority of projected retirement income for most retirees, so its inclusion in estimates is timely and appropriate in many situations," the company's analysis said.
It said there were a number of new protections for trustees which would enable them to look at providing estimates including ASIC's clarification that it will not take action against trustees if they follow prescribed assumptions and methodologies.
The analysis said there had previously been concern that following some of the requirements in the Class Order (for example, assuming that contributions made in the previous year would continue unchanged into the future) could produce misleading estimates and provided a major barrier to some trustees to provide these estimates to their members.
The Towers Watson analysis said, however, that while the changes were very welcome, the Class Order mechanism being used to facilitate provision of retirement estimates was still somewhat cumbersome.
"We believe the provision of retirement estimates is a powerful engagement tool. Nonetheless, issues around the retirement estimates for each member need careful thought and planning by trustees, as they may not be useful for all members," it said.
"It makes sense to identify those members for whom the estimate is likely to be useful and include appropriate communications that place the estimate in context, and include a suitable ‘call to action' if required."
