Nineteen super funds say they are finding getting ready for the RIC challenging – but they are stepping up to the challenge.
With the 1 July 2022 deadline fast approaching, a survey of 19 super funds shows that they are finding getting ready for the RIC challenging – but that they are stepping up to the challenge. Australian super funds will need to publish a retirement income strategy before the deadline to comply with the new legislation.
CoreData conducted a research survey and interviews to assess super funds’ readiness to meet the deadline and requirements of RIC legislation. The research, commissioned by Challenger, consisted of one-on-one interviews and quantitative surveys conducted with 43 professionals working at 19 super funds.
The June 2022 report, drawing on key findings from the research, suggests super funds believe they are well-prepared to meet their RIC obligations. However, while senior executives in the majority of super funds believe they have a well-articulated strategy to comply with the RIC, product managers and those responsible for executing the strategy plans in these organisations have a lower awareness of this strategy or are not so sure their fund is ready.
Leaders are also divided on how to operationalise their strategy – half are expecting to further develop their internal capability while two in five are seeking solutions from partners/providers to help plug gaps in their knowledge base (such as institutional term annuities and the decumulation investment mandate).
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. At 89%, demand is twice as high as any other gap in the solutions funds need to support their RIC rollout. 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.
CoreData Global CEO Andrew Inwood welcomed super funds’ interest in expert support for managing longevity risk for their members. “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.
“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.”
“Partnering with an expert will enable a fund to bring a compliant, fit-for-purpose retirement income product to market quickly with fewer internal resources dedicated to longevity protection.”