Retirement Income Covenant - Market Review 2023

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Review and Benchmarking of Superannuation Fund Trustees’ Retirement Income Strategies post 1 July 2022

Published March 2024

The “Review and Benchmarking of Superannuation Fund Trustees’ Retirement Income Strategies to 31 December 2023” report examines 57 RSE Licensees’ Strategies representing over 100 superannuation funds, including virtually the entire Australian Retirement Market covered by the Retirement Income Covenant.

Background

Since the commencement of the Retirement Income Covenant (RIC) from 1 July 2022, RSE licensees have published summaries of their Retirement Income Strategies (‘Strategies’ or ‘RIS’). Plan For Life conducted an initial online review of published RIC strategies and has identified a large degree of variation across registrable superannuation entities. We recognise that these initial strategies are only the start of a process which will see the various aspects of the RIC legislation being increasingly implemented.

However, in order to inform the market, assist RSEs, legislators and consultants, and provide transparency of progress to date, we have undertaken an independent analysis and benchmarking that examines each Retirement Income Strategy and scores underlying factors.

We should emphasise that at this stage the analysis has been quantitative, and we have not examined the quality of the elements, but as we receive feedback and more information becomes available, this is an aspect which may be considered. 

1.  Overall Benchmarking Results Across the Industry

Benchmark Factors have been developed based on the Retirement Income Covenant Position Paper (19 July 2021) and Implementation of the Retirement Covenant (7 March 2022) that are focused on the key criteria for comparing the Retirement Income Strategies (RIS) formulated by Registrable Superannuation Entity Licensees. Benchmarking factors include:

  • Member Data Analysed

  • Cohort Definition

  • Provision of Calculators and Tools

  • Products and Meeting Longevity

  • Member Services

  • General and Personal Advice

  • Strategy Approach and Application

2.  Use of Longevity Products

Market uptake of Longevity Products (including lifetime annuities, fixed term annuities, group pensions and non-annuity income-stream products), Bucketing and Smoothing e.g. a growth-style option is combined with a cash or lower growth option to enable the higher growth option to maximize returns, and Transfer Rewards and Bonuses i.e. when members transfer their accounts from accumulation to retirement income-streams.

3.  RSE Licensee Strategy Profile

  • Fund Summary

  • Member Support

  • Member Cohorts

  • Benchmarking

Next Steps

Contact us for more information about research and consulting services from Plan For Life:

  • Retirement Income Covenant Market Review 2023 - Executive Summary is available for review (no charge)

  • Retirement Income Covenant Market Review 2023 - Full Report is available for purchase.

  • Consulting Service – “Actuarial Review of the Strengths, Weaknesses and Risks of Lifetime Annuity Providers”, to assist Superannuation Fund Trustees in the selection process of an annuity provider.  The requirement to formulate a retirement income strategy to assist members to meet their retirement income objectives is based on the Retirement Income Covenant. This research provides considerable assistance to Superannuation Fund Trustees where a ‘white labelled’ lifetime annuity or deferred annuity is proposed to be available to fund members in retirement, thereby providing members with an investment option which assists in meeting longevity risk. In particular, where Superannuation Fund Trustees have already identified potential annuity providers, PFL research can be used to support the decision to appoint one or more annuity providers. The Review of Lifetime Annuity Providers is updated annually or during the year if a major change to the insurer/s or the products occurs.

  • Consulting Service – “Actuarial Review of Member Cohorts and Opportunities”, to assist Superannuation Fund Trustees to identify individual member account opportunities. Analysis of pension drawdown behaviour of member accounts, cohorts and member-specific characteristics will lead to identifying individual members whose accounts are being operated effectively and those which are not, and where advice on different asset allocations, extent of drawdowns or use of an income-stream product would be of material assistance.