Frequently asked questions

Retirement income covenant

  • Superannuation
  • Current
    1 June 2022

Implementation of retirement income covenant - Frequently asked questions

Following APRA and ASIC’s joint letter on the implementation of the retirement income covenant (published on 7 March 2022), the FAQs published assist registrable superannuation entity (RSE) licensees in developing their retirement income strategies to meet the requirements of the retirement income covenant.
These FAQs have been developed with input from ASIC.

What are APRA’s expectations of RSE licensees in relation to developing their retirement income strategy and meeting the requirements of the retirement income covenant by 1 July 2022?

RSE licensees are required to formulate a retirement income strategy (the strategy) and publish a summary of the strategy on the superannuation entity’s website by 1 July 2022.
APRA and ASIC’s joint letter on the implementation of the retirement income covenant includes a number of steps that a prudent RSE licensee would consider when developing their retirement income strategy.

Can RSE Licensees submit draft retirement income strategies to APRA for feedback before 1 July 2022?

RSE licensees are required to formulate a retirement income strategy that meets the requirements of section 52AA of the SIS Act.  APRA will not be providing feedback on draft retirement income strategies.
However, during 2022/23, APRA and ASIC intend to commence a review of RSE licensee’s’ implementation of the new requirements. The findings will be shared with industry once completed.

What do RSE licensees need to do from 1 July 2022 to implement their retirement income strategies?

RSE licensees are expected to be implementing the retirement income strategy (the strategy) from 1 July 2022. APRA and ASIC also expect the implementation of the strategy to be subject to a continuous improvement process. In addition, RSE licensees must maintain a current summary of the strategy that is available to the public at all times, even if the strategy is currently under review.
APRA and ASIC’s joint letter on the implementation of the retirement income covenant  includes a number of steps that a prudent RSE licensee would consider in implementing their strategies.

Is there any existing guidance on reviewing the outcomes of retirement income products?

Yes. As SPS 515 applies to all beneficiaries and covers the entirety of an RSE licensee’s business operations, much of the existing regulatory guidance, such as guidance on undertaking an annual outcomes assessment, setting and monitoring strategic objectives, establishing a business plan, and reviewing business performance in Prudential Practice Guide SPG 515 Strategic and Business Planning and Prudential Practice Guide SPG 516 Business Performance Review applies to retirement income products. 
In addition, ASIC’s guidance on the design and distribution obligations (DDO) may assist RSE licensees: Regulatory Guide 274 Product design and distribution obligations. For example, determinations of retirement income products’ target markets may identify gaps in the product offering for retiring members. RSE licensees may also use the retirement income strategy to frame retirement income product development and identify the target market for products.

Can the retirement income strategy cover the provision of financial product advice? (response provided by ASIC)

Yes. While an RSE licensee is not required to offer financial product advice as part of its retirement income strategy, the retirement income covenant does not prevent the RSE licensee from offering financial product advice (including personal advice), so long as the RSE licensee (or the entity providing the advice) is licensed to provide the advice and is operating within the existing financial advice framework.
APRA and ASIC’s joint letter on the implementation of the retirement income covenant includes a number of steps that a prudent RSE licensee would consider when developing their retirement income strategy, including considerations relating to financial advice.