‘Big stride forward’: Industry welcomes reforms to improve retirement phase of super

The superannuation industry has come out in support of a suite of initiatives unveiled by Treasury towards reforming the retirement phase of superannuation.

Addressing the 2024 ASFA Conference last week, Treasurer Jim Chalmers announced a new package of reforms aimed to “give retirees peace of mind, help them make their super go further and provide more support to navigate retirement”.

The reforms focus on four critical areas to strengthen retirement outcomes, namely enhancing independent guidance; improving quality and choice in retirement products; a new set of voluntary best practice principles for the industry; and increased transparency.

Debby Blakey, chief executive at HESTA, said the fund welcomes the government’s proposed reforms.

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“We welcome the government's proposed retirement reforms, which offer a valuable opportunity to help ensure the needs of our members, women and lower-income earners are better accounted for in the modernised retirement system,” she said.

Aware Super said it is pleased to see the initiatives that will help super funds deliver better products and retirement experiences to members.

“Retirement is personal. So we applaud the government for committing to consult on a retirement reporting framework, with key metrics in retirement, so we can start from a common set of industry standards,” it said.

“Proposed changes to product rules will also help us deliver innovative products with new features that work better for members and their individual retirement needs.”

Joshua Lowen, insights manager at SuperRatings, told Super Review the research house remains “generally supportive” of any actions that increase innovation and transparency within superannuation.

“We also believe many Australians will benefit from access to additional education, help and guidance throughout their retirement journey,” Lowen said. 

“At the same time, it is important when designing retirement products and guidance that there is appropriate consideration given to members’ circumstances as each retirement journey will have unique aspects.

“We look forward to additional detail and consultation on the proposed reforms and will engage with Treasury throughout the consultation process wherever we believe our deep data and broad market insights have value to add.”

AMP chief executive, Alexis George, pointed out that the need to build financial confidence among Australia’s growing numbers of retirees remains “one of the most socio-economic challenges we face”, requiring a collaborative effort from the government, industry, and regulators alike.

“Building the financial confidence of retirees will be achieved through a combination of improved financial literacy levels starting from high school through to retirement, simplifying our retirement and age pension system, increased access to affordable financial advice, and more innovative solutions which unlock equity from the family home and provide greater assurance on lifetime income. This requires a collective and collaborative effort from industry, regulators and Government,” George stated.

“The accumulation side of the super system is doing a great job at building retirement savings for all Australians. We need greater focus on helping retirees reap the benefits in later years.”

Role of financial advice

Blake Briggs, chief executive of the Financial Services Council, remarked that the industry body looks forward to working with Treasury on the outlined scope of work, including the development of voluntary best practice principles which could help trustees fulfill their Retirement Income Covenant obligations.

“As these principles are developed, it is important they recognise the range of consumers’ needs in retirement and diversity of retirement products. For Australians, no two retirements are the same,” Briggs.

He also noted product features remain just one part of ensuring good retirement incomes, with a good offering also encompassing the services the fund offers, such as guidance and financial advice, and its service delivery.

Earlier this year, FSC research found there will be a 70 per cent growth in the number of Australians that will have complex financial affairs in 25 years’ time, necessitating a more personalized approach to each member’s retirement.

In a statement, MLC agreed the reforms will prove crucial as over 2.5 million Australians approach retirement within the next decade, with financial advice set to play an important role.

“These reforms are designed to work in tandem with the Delivering Better Financial Outcomes (DBFO) package and we urge the Government to prioritise the DBFO reforms to enable more Australians to access financial advice,” it said.

The Super Members Council also highlighted access to quality and affordable financial advice as the “missing piece in the retirement puzzle” and called for the promised reforms to be urgently legislated this Parliamentary term.

“These important reforms are a big stride forward to give more Australians more choices in how they start to draw down and spend their super as income in retirement,” said SMC chief executive, Misha Schubert.

“We want retirement to be simple, easy and flexible. People want to know how much they’ll have when they retire – and the new tools announced today will help.”

However, to support the millions of Australians on the runway to retirement with access to simple information to plan for their next stage of life with confidence, financial advice will be vital, she said.

“Advice is the urgent missing piece of the retirement puzzle, and there is a strong shared resolve across the breadth of the sector to see reform progress swiftly,” Schubert remarked.

The industry body noted observations from the Quality of Advice Review that financial advice would remain unaffordable for most Australians unless super funds are allowed to enter this space, with research finding more than 70 per cent of Australians would want advice from their super funds if it were specifically tailored to their circumstances.

It also urged the government to make it easier for members to switch into retirement products and end the current ban on being able to add super contributions to a retirement-phase super account; and, with member permission, urged the government to notify funds about their members’ eligibility for pensions and other government supports.