The new covenant will require trustees of APRA-regulated funds to have a retirement income strategy that outlines how they plan to assist their members in retirement.

The trustee’s retirement income strategy will need to consider how they will assist their members to balance maximising their retirement income, managing risks to income and having some flexible access to savings.

FPA chief executive Sarah Abood said the FPA welcomes the passage of the new retirement income covenant.

“This legislation establishes requirements for trustees to outline to members how their superannuation fund’s retirement income strategy will assist them in their retirement,” said Ms Abood.

“This is an important improvement on the current legal obligations for super funds, which have to date been mainly focused on the accumulation phase of members rather than their retirement.”

The FPA has long been calling for retirement income products to be developed for Australian retirees, which allow them to select the best options to suit their unique retirement needs, she stated.

“The ‘one size fits all’ approach in the system has limited the ability for retirees to mix income, lump sum, longevity and market risks adequately. Given these changes, financial planners now look forward to their clients having the ability to access a broader range of options,” said Ms Abood.

“Overall these changes will help provide certainty and confidence to retirees as more and more Australians begin planning for this next stage of life.”