The federal government is signalling it wants super funds to do more for members in retirement, and Treasury has just released broad in-principle guidance for new “longevity” options designed to help people stretch their savings, but the rules that would actually let funds give clearer and cheaper advice remain stuck in limbo. The super system, built over decades to grow balances during working life, is now being pushed into a new phase where it must help members spend those savings confidently and both policymakers and funds know they are behind where they should be.
Treasury’s latest guidance encourages more use of longevity-style products such as annuities, which can provide income for life, yet these offerings have been available for years and still attract patchy demand because many members see them as complex or expensive. At the same time, a major legal review in late 2022 laid out a detailed plan to make financial advice more accessible and affordable through super funds, but those recommendations have barely moved, in part because financial advisers fear losing work, funds fear stepping too far ahead of regulation and politicians seem content to issue discussion papers instead of firm rules.
While the government focuses on compensation schemes, collapsing investment vehicles and managed investment reforms that directly affect consumer losses today, including a $1.2 billion fund failure and the design of a last-resort compensation mechanism, it is also using those issues as cover to put off decisions on advice reform that could help prevent problems tomorrow. Industry lawyers and policy groups argue that failures have occurred under the existing laws, so waiting for a “perfect” rule book is unrealistic, as problems will arise under any framework and tighter guard rails plus clearer permissions for super funds to guide members look like the more practical path.
In the meantime, big not‑for‑profit funds that dominated the accumulation phase are discovering how exposed they are in retirement. One $400 billion fund saw around $300 million flow out to external advice platforms such as Hub24 in a single financial year, after years of being a net winner of member rollovers, including a competitive inflow of about $15.4 billion from rivals in 2022. Industry research shows advertising by these funds jumped from $472 million to $519 million over the last year in a “spend to defend” push to keep members loyal, even though many members would likely prefer those dollars lifting investment returns instead.
Longer term, the sector looks set to concentrate even further, with projections suggesting that by 2035 there could be just 11 mega funds each managing around $840 billion in a $5.8 trillion system, compared with average balances of $389 billion in today’s $2.7 trillion industry. That kind of scale makes the quality of retirement guidance and product design even more critical, because a slow policy response now seems to be accelerating money flows towards flexible platforms and away from traditional funds, which raises questions about whether government hesitation on advice rules is unintentionally speeding up the very member exodus it wants to avoid.
