Retirement Advice Changes for SMSFs?

5 Dec 2023

Written by

David Busoli, Principal

The discussion paper on the Retirement phase of superannuation contains some interesting items. One of these is the suggestion that the SMSF sector might be included in the retirement income covenant.

“While SMSF members are encouraged to consider their long-term retirement income requirements, they do not receive the same entitlement to support that members of APRA-regulated funds receive under the retirement income covenant. There is no safeguard that they will receive an equivalent level of guidance, risk management, or retirement income product solutions.

In addition, SMSFs may face unique challenges in retirement, including a need for exit planning in the event of the member-trustee becoming unable to manage the fund at older ages or due to the death of a member of the fund who undertook management responsibilities.”

Essentially the retirement covenant requires trustees to “develop, publish, implement and regularly review a retirement income strategy to assist their members in balancing three key goals in retirement. These objectives are:

  • maximise their retirement income,
  • manage risks to the sustainability and stability of their retirement, and
  • have some flexible access to savings during retirement.”

This is exactly what a financial planner provides and, given the very specific nature of the planner’s focus, on a much more personal basis than an APRA fund trustee. Clearly, those SMSF trustees without a financial planner will be unable to increase the knowledge of their members by talking to themselves. The current movement to relax the restrictions on unlicenced accountants to provide basic SMSF advice will not affect this. I fear that including a need for SMSF trustees to consider the provisions of the retirement income covenant will only result in the inclusion of meaningless standard templates into SMSF investment strategies but I wait, with interest, to see what the discussion reveals. Submissions close on February 9th.

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