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Law Council of Australia

Legal Practice Section

Retirement Income Covenant - September 2021

The submission to the Treasury in relation to the proposed introduction of a retirement income covenant for Australian Prudential Regulation Authority (APRA) regulated superannuation trustees (RI Covenant) as set out in the Exposure Draft Legislation released on 27 September 2021 (Exposure Draft Law) was prepared by the Superannuation Committee of the Legal Practice Section (the Committee).

The RI Covenant is proposed to be added to the existing suite of statutory covenants applying to APRA regulated superannuation trustees under the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS).

The Exposure Draft Law for the RI Covenant is set out in proposed new sections 52(8A) and 52AA of SIS and is summarised at page 4 in the Draft Explanatory Materials (EM) as follows:

Implement a new covenant that requires trustees of an RSE to prepare a retirement income strategy to assist beneficiaries achieve and balance three objectives:

  1. maximizing their expected retirement income;
  2. managing expected risks to the sustainability and stability of their expected retirement income; and
  3. having flexible access to expected funds during retirement. This includes obligations to: - take reasonable steps to gather the information necessary to inform the formulation and review of the strategy; - record the strategy in writing; - record a range of matters as part of the strategy; and - make a summary of the strategy publicly available on the website of the RSE. 

The Committee’s submission is intended for consideration by Treasury in finalising the legislative framework in which the RI Covenant will operate. The new laws as drafted should provide a simple and clear pathway for regulated super fund trustees to develop, determine, record, publish and implement a fund retirement income strategy (RI Strategy) for their beneficiaries, in accordance with the government’s stated policy objectives and consistent with the complex, regulatory and legal environment in which trustees must already operate.

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