A recent survey of 19 super funds has revealed that Australian super fund leaders are confident that they are well prepared to meet their Retirement Income Covenant (RIC) obligations by 1 July.
Namely, following changes to superannuation legislation in February, trustees must have a retirement income strategy in place and publish a summary by 1 July.
A research survey of 43 professionals working across 19 super funds, conducted by CoreData and commissioned by Challenger, revealed that while senior executives are confident in their fund’s ability to meet the deadline, product managers and those in charge of executing strategy plans in these organisations are not so sure their fund is ready.
Moreover, the research revealed a division among leaders on how to operationalise their strategies, with half expecting to further develop internal capabilities, while two in five support looking to partners for solutions to help plug gaps in their knowledge base.
However, it is longevity solutions for managing longevity risk – the risk of running out of savings during retirement - that top the list for super funds needing expert support.
In fact, as many as two in three funds said they will outsource longevity risk to third parties, while one in four funds did not know if they would do this.
“What’s unique about longevity risk is that it’s specific to retirees and needs a specific solution. Managing investment strategy is only part of the answer; it will not solve longevity risk,” CoreData Global CEO Andrew Inwood said.
“The internal capability a super fund needs to implement a longevity solution or mitigate longevity risk is considerable in terms of their operational capability and liability management.”
Mr Inwood added that partnering with an expert could enable a fund to bring a “compliant, fit-for-purpose retirement income product” to market quickly with fewer internal resources dedicated to longevity protection.
