The Australian Securities and Investments Commission (ASIC) has amended the rules governing superannuation and retirement funds to ensure their predictions of future earnings are adjusted for inflation.
In a statement, ASIC said the new requirements, conveyed in an amended ‘Instrument’, would begin on 5 December this year, providing a transition period of six months.
ASIC said the amendments required superannuation and retirement funds to adjust for inflation in their estimates of future earnings by using one of two methods.
It said they could either use the default inflation rate or an alternative inflation rate, as long as certain disclosure requirements were met.
ASIC said the default inflation rate was the rate used by ASIC’s MoneySmart superannuation and retirement calculators.
“It includes a component that reflects changes in the cost of meeting increases in community living standards,” the Commission said.
“Adjusting for the cost of meeting increases in community living standards may assist users to better decide if future retirement assets or income will be adequate compared to their standard of living.”
It said the option of using an alternative inflation rate recognised that there might be instances where it was appropriate for a superannuation and retirement calculator to use a different inflation assumption.
It said this could be to take into account the wage profile of the likely user, or the provider’s wage growth outlook.
“Superannuation and retirement calculators can be a useful and cost-effective educational tool through which users can better understand their financial circumstances and goals,” ASIC said.
“The amendments to the instrument will promote the comparability of superannuation and retirement estimates whilst providing flexibility for providers to use a different inflation rate assumption where it is reasonable to do so.”
ASIC’s new Instrument can be accessed at this PS News link.
