The lack of progress by superannuation funds in tracking the success of their retirement income strategies, an area specifically called out in APRA and ASIC 2023 thematic review report, is most concerning, APRA deputy chair Margaret Cole has said.
Speaking at the Conexus Retirement Conference last week, Ms Cole added, “Three-quarters of trustees told us that measuring retirement outcomes was a priority, and yet only a limited number of success metrics was reported in the survey by trustees.”
She stressed that super funds have to put metrics in place now, to set a baseline from which to assess the success of their retirement income strategy and to address any weaknesses in a timely way.
Another key call-out from the thematic review was the need to fully integrate retirement income strategies into a super fund’s broader business planning and performance process.
APRA’s recently updated prudential standard for Strategic Planning and Member Outcomes clarifies its expectations on this point.
Ms Cole said, “Under the new standard, you will be required to conduct a review of the appropriateness, effectiveness and adequacy of your retirement income strategy every three years, at least.
“You are also required to assess and demonstrate – every year – the outcomes achieved for members as a result of your retirement strategy, and to embed this practice in your business performance review process.
“These new requirements clearly articulate sound business practices that I would hope many of you were already planning to do.”
Ms Cole pointed out that the surge of superannuation fund members moving towards retirement is resulting in strong growth in assets held in retirement products. As of March this year, just over A$450bn ($300bn) of superannuation benefits were held in retirement products, A$53bn more than a year ago,
She also said that a pulse check showed that many superannuation funds have taken steps to better understand the varying retirement income needs of member cohorts and have stepped up efforts to promote availability and access to retirement-focused information for members. “This is promising progress although with just one in five planned improvements completed by mid-June, the pace of change could be a great deal quicker,” she said.