If you’ve got a Self-Managed Superannuation Fund (SMSF) you may know that each year the fund has to sign off on an investment strategy that outlines the types of investments that it’s approved to invest in. This strategy is set by the trustees and is completed within the frameworks stipulated in the Superannuation Industry (Supervision) Act (SISA).
Currently, the SISA outlines obligations to formulate, review regularly and give effect to investment, risk management and insurance strategies. But strangely enough, there are no obligations for trustees to consider the retirement income needs of their members and outline how the SMSF will finance those needs.
In the 2018-2019 Federal Budget the Government proposed a retirement income framework that intends to increase individuals’ standard of living, increase the range of retirement income products available, and empower trustees to provide members with more guidance during their transition into retirement.
As part of this framework, the Government has proposed a further condition to the SISA. If legislated, investment strategies must include a ‘retirement covenant’. This will make it mandatory for trustees to develop a retirement income strategy for their members to ensure that the SMSF can meet the pension and retirements needs of its members.
Trustees must formulate, review regularly and give effect to a retirement income strategy to help members meet their income objectives during retirement.
The Retirement Income Position Paper proposes that a retirement strategy needs to be implemented and trustees need to engage with their members. They state that a number of factors should be taken into consideration when designing the strategy in order to optimise each member’s retirement outcome. These include:
So, what now? If you have an SMSF, the short answer is nothing. Our advisers at The Hopkins Group will track this proposal as it progresses through our legislative system and will keep you in the loop. As the trustees of many SMSFs, our clients can sit back and know that we stick to their obligations. Want to know more? Contact one of our advisers today.
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