APRA and ASIC super letter canvasses ‘prudent’ advice offerings

The Retirement Incomes Covenant (RIC) does not require superannuation funds to offer retirement income products to their members, but Australia’s two financial services regulators have made clear they expect that such products will be offered.

At the same time, the two regulators have suggested to superannuation funds how they can work around the anti-hawking provisions in making retirement income product offers to members and have canvassed the provision of financial advice in the context of “fit for purpose assistance for members”.

It suggests in an attachment detailing considerations for a prudent RSE licensee, that superannuation funds which are not licensed to provide general or personal advice or would be unable to comply with the obligations for giving advice, “consider alternatives as such as referring members to externally provided financial advice services (i.e. provided by a different entity), and ensuring adequate controls are in place to oversee the deductions from a membver’s superannuation account to pay for such advice.

The attitude of the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) has been made clear in a guidance letter issued to superannuation funds this week.

The letter states that while “the covenant does not specifically require RSE licensees to develop or offer retirement income products” APRA and ASIC expect them to “consider whether to make changes to any existing retirement income product offerings, including whether to offer products external to the RSE licensee’s own products, in the context of their specific circumstances”.

In an attachment to their letter to superannuation fund trustees, APRA and ASIC suggest that funds implement controls to ensure that retirement income products are not offered contrary to the hawking prohibition.

“For example, RSE licensees could consider providing information about available products without making a real-time offer or invitation to apply, by making any offers or invitations through other channels (e.g. written communications), or by seeking member consent to receive offers or invitations in real time,” the letter’s attachment said.

It also suggests funds should “consider providing factual information to members about retirement income, for example, information about eligibility for the Age Pension or aged care, the concept of drawing down capital as a form of income, or the different types of income streams available”.

It also suggests funds “consider making available budgeting tools or expenditure calculators that do not relate to specific financial products.