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Super funds lack data for effective retirement assistance: Study

Super funds lack crucial data on members' retirement income certainty preferences, hindering effective retirement assistance and compliance with Retirement Income Covenant obligations, research by Capital Preferences and Challenger reveals.

The survey of 4000 Australians showed 78% feel unprepared for retirement, with a similar number ambivalent when it comes to feeling their super fund has empowered them for retirement.

A corresponding APRA/ASIC audit on implementation of the retirement income covenant underscores the member understanding and data gap that stands in the way of the industry making progress against the RIC and retirement preparation challenge.

"All RSE licensees were missing data that is critical for developing an effective retirement income strategy," the audit said.

"RSE licensees need to be aware that segmentation done based on very narrow member information and consideration could potentially lead to developing inappropriate strategy and inadequate

assistance to members."

The research also indicated that retirement income preferences are highly individualised, and don't correlate with demographic or financial data.

The report argues that super funds should not solely depend on such data but should include lifetime income in adaptable solutions to meet diverse member needs.

Meanwhile, it estimated an additional 40% of retirees and pre-retirees should have guaranteed lifetime income in their retirement income mix, compared to, at most, 8% today, representing $145 billion of additional superannuation balance for over two million members aged 55-74.

"There is already a lot being done, and we all need to team up - the government and the industry - to ensure financial security for those in retirement. Instead of just having a 'nest egg,' let's focus on ensuring there's an option for retirees to have a guaranteed income stream, Challenger chief executive, customer Mandy Mannix told Financial Standard.

"We need to align with the legislated purpose of superannuation and ensure that Australians are properly informed about the choices available in retirement. Critically, they need to feel confident in making those choices."

Read more: ChallengerRetirement Income CovenantCapital PreferencesFinancial StandardMandy Mannix