Australian super funds have been slammed by regulators for failing to properly implement reforms aimed at helping members prepare for retirement.

The Albanese government implemented changes in July 2022 that force super trustees to create strategies to assist members in planning their post-work lives as retirement approaches.

But a review published on Tuesday by the corporations and prudential watchdogs revealed that many of the funds covered by the changes have failed to properly implement the requirements.

A report into the performance of 16 funds – which together cover about half of all super accounts for members aged 45 and over – found data “critical” to developing such strategies is missing.

A “sizeable proportion” of funds also “lacked concrete plans” to fix gaps they themselves had identified in the types of retirement assistance being offered, with regulators saying funds must do a better job offering “fit-for-purpose” strategies.

Australian Prudential Regulation Authority (APRA) deputy chair Margaret Cole said the regulator is willing to enhance its “prudential framework” in response to the review findings.

In other words, Ms Cole is signalling that a crackdown might be on the horizon if funds don’t get their acts together.

“A further three million members will become eligible to draw from their super in the next 10 years. They are entitled to rely upon their super fund for assistance as they plan for a sound financial future,” Ms Cole said.

“Some trustees have made a good start, but overall there has been a lack of progress and insufficient urgency.

“As more members approach retirement, trustees must step up and deliver both well-considered strategies and action to support members in retirement.”

Fund failures laid bare

The 2022 reforms passed by the Albanese government created a covenant in super laws that required funds to create strategies to assist members approaching retirement, amid fears many Australians are diving headfirst into their post-work lives without adequate financial planning.

For example, a majority of retirees in Australia die with the bulk of the wealth they had at retirement intact, suggesting many people are living a lower quality of life than necessary.

The reforms were designed to be flexible so that funds could decide for themselves how best to assist members with meeting their retirement income needs.

The Australian Securities and Investments Commission (ASIC) and APRA found funds were focusing on expanding the assistance that they offer members as they approach retirement, but, overall, there has been a lack of progress and “insufficient urgency”.

Funds told to improve

For example, regulators revealed that while funds had drawn from a range of internal and external data sources to understand what their members need in retirement, there was still “critical” information missing that prevented funds from developing effective strategies.

Further, regulators took aim at funds for failing to adequately tailor their advice to members, suggesting many hadn’t put in place concrete plans to address gaps in assistance they offer.

ASIC commissioner Danielle Press said funds must “get their fundamentals right” and design their retirement income strategies with consumer needs in mind moving forward.

“Helping fund members achieve good retirement outcomes is the core business for a super trustee and the retirement income covenant offers a lot of flexibility for trustees to effectively support their members’ needs,” she said.

“They need to be mindful that their members’ needs evolve over time and commit to continuously monitoring and improving their approach.”

Pending federal government reforms are set to provide funds with more flexibility about the types of advice they’re able to provide members, but ASIC and APRA said this shouldn’t be an excuse for trustees to delay action, suggesting there was plenty they can do under current rules.

That includes embedding retirement income initiatives into their overall business plans and building “quantitative metrics” to assess retirement outcomes that flow from those reforms.