In short

The Retirement Income Covenant, effective 1 July 2022, requires APRA-regulated super funds (not SMSFs) to formulate, review, implement, and publish a retirement income strategy addressing maximising income, managing longevity and investment risk, and preserving flexibility. Fund responses vary considerably — some offer sophisticated lifetime income products and intra-fund advice, while others meet the obligation with a bare-minimum strategy document and a basic account-based pension.

For most of the modern super era, the fund's job was to accumulate — to grow your balance over a working lifetime through compulsory and voluntary contributions, investment returns, and tax concessions. What happened at retirement was largely left to the member to figure out. Some funds offered account-based pension products; few had systematic approaches to helping members navigate drawdown rates, longevity risk, or the combination of super with Age Pension. The result was what the 2020 Treasury Retirement Income Review described as a systemic gap: members making consequential, irreversible decisions about retirement income with limited structured support.

The Retirement Income Covenant, which commenced on 1 July 2022, changed the structural framework. Trustees of registrable superannuation entities — effectively, APRA-regulated funds; self-managed super funds are excluded — are now required under the SIS Act to formulate a retirement income strategy for their members, review it regularly, give effect to it, and make it publicly available.

What the strategy must address

The legislation specifies three objectives a fund's retirement income strategy must address. The first is maximising retirement income — which requires the fund to think about income from super alongside the Age Pension and other sources, not just the super balance in isolation. The second is managing the risks that threaten retirement income sustainability, which in practice means longevity risk (outliving the money), investment risk (poor returns in early retirement), and inflation risk (purchasing power erosion). The third is providing flexibility — preserving members' ability to access lump sums, change their drawdown approach, or adjust their retirement structure as circumstances change.

These three objectives are simple to state and demanding to operationalise. A fund genuinely giving effect to them needs a product range that can address longevity (typically some form of lifetime income stream), default drawdown structures that balance income needs with longevity protection, and enough flexibility in those structures that members aren't locked in inappropriately. The breadth of what a serious RIC strategy requires is substantial.

The variation in fund responses

Fund responses have varied considerably. Better-resourced funds have built dedicated retirement teams, developed comprehensive product ranges including lifetime income products, invested in member education targeted at retirement-phase decisions, and established intra-fund advice services (limited financial advice provided by the fund itself without a separate advice fee). Their publicly available RIC strategies reflect genuine engagement with the challenges of retirement income.

Other funds have published strategy documents that technically satisfy the obligation but are short on substance, and their retirement-phase product offerings are thin — sometimes just an account-based pension with few further options. Members of these funds still face the retirement decision largely on their own.

The practical significance for members: the RIC has made fund quality in the retirement phase a visible, differentiable characteristic. Reading a fund's published strategy, looking at its retirement-phase product range, and asking whether it offers anything beyond a basic account-based pension are all reasonable things to do when assessing whether your current fund serves your retirement needs or whether another might do better.

Lifetime income products and the 2019 reforms

The RIC sits alongside the 2019 retirement income framework reforms that changed how certain lifetime income streams are treated in the Age Pension means test. Lifetime income products that meet specific criteria (broadly: post-July 2019 products with a required capital access schedule) have only 60% of their purchase price assessed under the assets test during the first phase of the product — a 40% concession — dropping to just 30% assessed from a later threshold day. This makes complying lifetime income streams genuinely attractive from an Age Pension perspective — of a $300,000 allocation to a qualifying lifetime income stream, only $180,000 is assessed in the first phase (falling to $90,000 from the threshold day), potentially adding several hundred dollars a fortnight in Age Pension.

The combination of the 2019 asset test reform and the RIC's push for funds to develop lifetime income products has produced measurable innovation in the super industry's retirement offering. More funds now offer lifetime income options than before, and competition is growing. For members interested in these products, fund availability matters — some funds have built meaningful lifetime income options; others have not.

What to look for as a member

The RIC strategy document is a starting point, not an endpoint. A meaningful strategy document is substantive and specific — it describes how the fund's products, advice, and education work together to serve retirement-phase members, not just that the fund has considered the issue. Beyond the document, the concrete things to assess are: what retirement products the fund offers (and how sophisticated the lifetime income options are); whether the fund provides intra-fund advice and what it covers; the quality and quantity of member education targeted at retirement-phase decisions; and whether the fund's fees and performance figures for pension-phase members are competitive.

Comparing funds on these dimensions has become easier since the RIC requires strategies to be publicly available. Looking at several funds' published strategies and product offerings before retirement is a reasonable part of pre-retirement planning — particularly for members considering consolidating multiple super accounts and choosing which fund to carry through to drawdown phase.

The RIC does not replace personal financial advice. It provides a better-quality baseline of fund-level support, which complements but is not a substitute for advice tailored to individual circumstances, age, balance, health, family situation, and estate planning goals.

Sources

Key takeaways

  • The Retirement Income Covenant, effective 1 July 2022, requires APRA-regulated super funds to formulate, review, implement, and publicly publish a retirement income strategy — SMSFs are excluded.
  • A compliant strategy must address three objectives: maximising retirement income, managing longevity/investment/inflation risk, and preserving flexibility for members.
  • Fund responses vary widely — some have built dedicated retirement teams, lifetime income products and intra-fund advice, while others meet the obligation with a thin strategy and a basic account-based pension.
  • Complying lifetime income streams under the 2019 reforms get a genuine Age Pension assets-test concession — only 60% of the purchase price is assessed initially, dropping to 30% from a later threshold day.
  • Since RIC strategies must be published, comparing a fund's actual retirement-phase products, advice, and education against its strategy document is a reasonable part of pre-retirement planning.

Frequently asked questions

What is the Retirement Income Covenant and does it apply to my super fund?

It's a legal obligation, effective from 1 July 2022, requiring APRA-regulated super funds to formulate, review, implement, and publish a retirement income strategy for their members. It applies to retail and industry funds but not self-managed super funds.

What is my super fund actually required to do under the Retirement Income Covenant?

Address three objectives: maximising retirement income (considering super alongside the Age Pension), managing longevity, investment, and inflation risk, and preserving members' flexibility to access lump sums or adjust their approach. How thoroughly a fund does this varies significantly.

Do all super funds offer the same quality of retirement support?

No. Better-resourced funds have built dedicated retirement teams, comprehensive lifetime income product ranges, and intra-fund advice services. Other funds have published a strategy document that technically satisfies the legal obligation but offer little beyond a basic account-based pension.

How do lifetime income products affect my Age Pension under the 2019 reforms?

Complying lifetime income streams that meet specific criteria get a genuine assets-test concession — only 60% of the purchase price is assessed initially, dropping to 30% from a later threshold day. On a $300,000 allocation, that's $180,000 assessed initially (falling to $90,000), which can add meaningfully to Age Pension entitlement.

A note on advice. This article is general information only and doesn't account for your personal circumstances. Everyone's situation is different — before acting, it's worth talking it through with a licensed adviser who knows your full picture.