Key points
- ASIC proposes to update the rate of nominal wage inflation in our relief instrument, which facilitates the provision of superannuation calculators and retirement estimates.
- ASIC proposes transitional arrangements to 31 December 2024 for providers to adopt the updated rate.
- Stakeholders are invited to provide feedback on ASIC's proposal.
ASIC proposes to update the rate of nominal wage inflation in ASIC (Superannuation Calculators and Retirement Estimates) Instrument 2022/603 (Instrument 2022/603), and Regulatory Guide 276 Superannuation forecasts: Calculators and retirement estimates (RG 276) in view of Treasury's revised long-term wage growth forecasts.
Instrument 2022/603 exempts providers of superannuation calculators and retirement estimates (collectively referred to as 'superannuation forecasts') from certain regulatory requirements related to providing financial product advice if they provide their superannuation forecasts within the terms of the ASIC relief.
When providing superannuation forecasts under ASIC Instrument 2022/603, providers must present superannuation forecasts in today's dollars and must, by default, convert future dollars to today's dollars using the prescribed default inflation rates, unless a user has inputted an alternate rate.
The prescribed default inflation rates reflect nominal wage inflation while a user in the accumulation phase (currently at 4% p.a.), and consumer price inflation while a user is in the retirement phase (2.5% p.a.). These rates respectively align with modelling in the 2021 Intergenerational Report (IGR), as well as in the Retirement Income Review, and the current midpoint of the Reserve Bank of Australia's target range for consumer price inflation.
To ensure that the default inflation assumptions in Instrument 2022/603 continue to reflect long-term economic conditions, ASIC proposes to revise the prescribed rate of nominal wage inflation in ASIC Instrument 2022/603 and RG 276 from 4% p.a. to 3.7% p.a., aligning the default rate with the long-term forecast of nominal wage inflation in the 2023 IGR. The long-term forecast of nominal wage inflation in the 2023 IGR was revised to 3.7% from 4% in the 2021 IGR.
We consider that the reduction of 0.3 percentage points in the long-term forecast of nominal wage inflation in the IGR 2023 evidences a material change to economic conditions for long-term wage growth, and as such, the default rate of nominal wage inflation in ASIC Instrument 2022/603 and RG 276 should be revised accordingly.
We do not propose further changes to other relief settings, including to the prescribed default rate of consumer price inflation (CPI). These settings were the subject of a consultation in Consultation Paper 351 Superannuation forecasts: Update to relief and Guidance and ASIC's response to the issues raised in that consultation is set out in Report 731 Response to submissions on CP 351 Superannuation forecasts: Update to relief and guidance. ASIC also sought advice from the Australian Government Actuary on key actuarial issues before finalising its relief instrument settings.
