“Providing income in retirement is fundamental to the purpose of super, but currently there is no retirement-specific governance framework,” Jeremy Cooper, Challenger’s retirement income chairman said.
“Our super system is more mature than most people realise. It’s doing the first part of its job, allowing people to accumulate assets through their working lives, with typical household super wealth at retirement in the $350,000-$500,000 range and increasing.
“This wealth was accumulated to provide income in retirement, but the system is not yet set up to do this next phase successfully.”
In a submission to Treasury, Challenger said the super system has reached a “critical mass” of $760 billion in retirement and more than 700 Australians retiring every day, and as such more needs to be done to meet Australians’ retirement needs.
The ASX-listed firm said Treasury’s recent proposal to introduce a retirement income covenant in superannuation laws would ensure strategies for super’s draw-down phase match these needs.
The submission said a requirement for funds to help members develop retirement income strategies would “plug a significant gap”, while a requirement for funds to offer annuity-style, comprehensive income products for retirement (CIPRs) would also provide retirees with better outcomes through risk pooling mechanisms.
Mr Cooper argued that a CIPR requirement was not a “revolutionary change” but a “necessary enhancement” to the super system.
Commenting on the Treasury position paper in May, Minister for Revenue and Financial Services Kelly O'Dwyer said superannuation has focused only on accumulating savings for too long.
"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,” Ms O'Dwyer said.