Findings, expectations and key challenges 7 min read
ASIC and APRA recently published their report, 'Industry update: 2025 Pulse Check on retirement income covenant implementation' (Report), following a voluntary survey of superannuation trustees on their compliance with the retirement income covenant. The Report is available here.
The regulators continue to criticise what they consider to be inadequate action by some trustees to comply with the covenant, while highlighting examples of specific 'better practices' among others.
In this Insight, we outline the regulators' findings, explore steps trustees can take to better meet expectations, and highlight the key challenges that still remain in the way of doing more to help members.
Key takeaways
- APRA and ASIC expect trustees to be taking action and to be 'investing significant effort' to lift the quality of support they provide to members approaching, or in, retirement with a focus on improving retirement outcomes for members.
- What this requires of trustees in a concrete sense is uncertain, but the 'better practices' highlighted in the Report suggest the regulators expect trustees to be collecting information to better understand the various cohorts of their members approaching and in retirement, and to deliver more targeted prompts, tools and guidance, and a broader range of retirement products. Trustees are also being expected to measure member outcomes and engagement.
- This poses a challenge for trustees given the risks of providing personal advice when delivering personalised guidance to members, with the Government's advice reforms still not finalised and the need for trustees to balance the benefits of providing members with a broad range of retirement products against the costs and risks of low take-up, especially of longevity products.
Background
The Report follows the inaugural joint ASIC and APRA review into the implementation of the retirement income covenant in 2023, which found a lack of progress and insufficient urgency from trustees in embracing the covenant, and the 2024 'Pulse Check', which found that progress had been made by trustees in some areas, but many were still not adequately tracking the success or otherwise of their retirement income strategy. It also follows ASIC's findings in Rep 818 about both good and poor practices in the way trustees are communicating to their members about retirement in the lead up to, and through, retirement.
The 2025 industry survey asked the 39 superannuation trustees who participated to comment on:
- their progress in implementing the retirement income covenant and improvements made or planned since the 2024 Pulse Check;
- challenges in implementing their retirement income strategy, and
- their planned initiatives across the following three areas for the effective implementation of the covenant:
- identifying and understanding members’ needs in retirement;
- assisting members with information, financial advice and product offerings; and
- executing and overseeing their retirement income strategy and assessing whether the intended outcomes are being achieved.
The Report summarises the trustees' responses, the regulators' observations and includes examples of what the regulators consider to be 'baseline' and 'better' practices in implementing the retirement income covenant.
Key findings and observations
The Report claims the overall pace in delivering meaningful outcomes for members in retirement is inconsistent across the industry.
While some trustees have shown leadership by investing significant effort into meeting the retirement needs of members, many have been content with incremental improvements, and there was less than expected investment in governance, innovative retirement income solutions and tailored support for members.
The Report includes the following observations:
- Use of data: most trustees have invested significant effort in understanding their members’ needs, by improving data capabilities and identifying and addressing data gaps called out in previous reports. These include improvements in data collection (including from external sources) and direct member engagement.
- Member 'cohorts': most trustees identified a need to further refine their retirement income strategy and their approach for determining member cohorts.
- Support services: most trustees are focusing on improving and expanding services to support members approaching retirement, with some trustees developing support services for specific member cohorts. However, there is still little focus on providing support services to members in later stages of retirement.
- Products: trustees continue to refine their current retirement income product offerings and are largely focused on enabling members to tailor retirement income solutions through access to advice, guidance, digital tools and education.
- Governance: governance and oversight have strengthened, but many trustees are still grappling with how to gauge effectiveness of their retirement income strategies. There is less focus from trustees on taking steps to regularly measure the retirement outcomes delivered to members, or impact on member experience and satisfaction.
- Engagement: member engagement has increased but consistent behavioural change has not been observed, particularly around drawdown strategies.
The regulators encourage trustees to focus on improving retirement outcomes for members by reflecting on the better practices outlined in the Report.
Key challenges
The Report notes the following key challenges trustees say they encountered in implementing their retirement income strategies. The Report does not offer answers to these challenges, and trustees will likely be expected to find their own solutions to ensure they do not fall behind peers.
| Category | Description |
|---|---|
| Data | Insufficient member data to develop a holistic representation of member circumstances, especially non-financial data such as partnership status, home ownership status etc, limiting ability to segment at a more granular level, or develop specific and personalised retirement income solutions. |
| Advice | Ongoing uncertainty with advice-related regulatory reforms, limits to accessibility, and cost of financial advice, especially for members with lower balances. |
| Product | Challenges in developing and launching retirement products due to market immaturity or low demand. |
| Engagement | Low member engagement and financial literacy, making communication and education difficult. |
| Regulatory clarity | Uncertainty relating to regulator expectations |
| Cohort | Difficulty in identifying and segmenting member cohorts for tailored strategies (such as drawdown strategies). |
| Privacy | Privacy concerns and regulatory constraints in collecting and using member data. |
| Metrics | Challenges in defining and tracking meaningful success metrics for the retirement income strategy. |
Better practices
The regulators note 'baseline' and 'better' practice examples in the Appendix to the Report grouped into the categories of 'understanding members', 'addressing member needs', governance and oversight, and measuring impact.
The 'better' practices noted are:
- Knowing your members: engaging with numerous internal and external sources to obtain a deep understanding of members, including their attitudes and behaviours that drive their decision making.
- Tailored 'experiences': tailoring communications, services and products using member segmentation.
- 'Cohorting practices': using knowledge of members to embed and refine a cohorting approach which is regularly reviewed to ensure it remains fit-for-purpose.
- Guidance and support throughout retirement: providing prompts or nudges to members based on operational, transactional or behavioural data, and referring members to third parties who provide retirement-related services.
- Guidance on drawdown strategies: providing information and case studies on drawdown strategies for specific cohorts of members that members can adopt, and implementing a default drawdown above the minimum rate at the product level.
- Tools and calculators: providing access to superannuation and retirement income projection tools that consider existing member information to provide detailed estimates.
- Product offering: offering multiple products to members appropriate to their breadth of needs, including longevity options and transition-to-retirement products, and providing case studies and proactive assistance services to members to assist them in choosing products.
- Board and senior executive structure: embedding retirement as a central tenet of the trustee's strategy and adopting retirement-specific governance committees.
- Member engagement and outcomes: using outcome-focused metrics and measures and behavioral and attitudinal analysis to track the impact of the retirement income strategy.
- Measuring effectiveness: using a range of activity metrics broader than basic trustee and member activity measures, for inclusion in the business performance review, and identifying gaps in the data to improve and refine measures and targets.
Next steps
Trustees should review the Report findings, and in particular the 'better' practice examples, and consider what changes they may need to make to improve their approach to complying with the retirement income covenant.
The Government is also expected to release the updated advice reforms, which should in theory make it easier for trustees to offer more personalised prompts (and even advice) to more members. We are yet to see the draft legislation for the proposed new class of adviser and the updated best interests duty. Trustees should look out for these reforms and consider how they could assist with providing a broader range of more targeted assistance to their members approaching or in retirement.
Please let us know if you would like to discuss your approach to the retirement income covenant or any of ASIC and APRA's observations and findings in the Report.