On Monday, the government released a discussion paper suggesting SMSF trustees cannot be expected to “solve on their own” the “risky, long-horizon, multi-dimensional problem” of navigating retirement income products.

Mr Burgess stated that APRA-regulated funds must have a strategy for members in or approaching retirement. They are also expected to implement a strategy focusing on maximising expected retirement income, managing risks, and providing flexible access to funds during retirement.

“The retirement income covenant does not apply to SMSFs so the discussion paper is really posing the question about how SMSFs go about meeting the above objectives and whether SMSFs should be doing more to maximise the retirement incomes of their members,” he said.

“Arguably for many SMSFs, particularly those with member’s in the retirement phase, compliance with the investment strategy covenant on investment composition and risk would ordinally cover off the core elements of the retirement income covenant.”

He said it is worth noting SMSF trustees who are advised by a licensed professional will be receiving strategic advice, and actively considering the requirements of their fund’s investment strategy as well as the core components of the Retirement Income Covenant.

“And we certainly support and encourage measures which will make it easier and more cost effective for advisers to provide this advice, and for more SMSF trustees to access this advice,” he said.

Meg Heffron, director of Heffron, said she was not convinced extending the Retirement Income Covenant to SMSFs would necessarily add much value.

“But I do like the emphasis on education and information that the consultation paper has. I suspect improving retirement literacy would have a more significant impact,” she said.

She said being under the umbrella of the covenant would force SMSF trustees to think about things like how they draw their super down in retirement and document it.

“In that sense, it’s very like the investment strategy requirements – they don’t force trustees to invest in a particular way but they force trustees to write down their goals and strategy for achieving those goals,” she said.

She added that statistics from the Class Benchmark report suggested the take-up of account-based pensions was very high in SMSFs.

“On the surface that suggests SMSF members are actually already doing the right thinking when it comes to retirement,” she said.

“However, in my experience, SMSF members do often draw the minimum pension permitted and an issue identified by the consultation paper is that our current minimum rates probably see many retirees taking too little income in retirement on the misunderstanding that the government is recommending them.”