The superannuation industry has closed the book on a stellar 2025 financial year, with a wave of double-digit returns providing a significant boost to member balances. This strong performance, driven by resilient global equity markets, has provided the financial firepower for a palpable shift in focus towards solving the retirement income challenge. A flurry of sophisticated product launches and strategic partnerships aimed at the decumulation phase dominated the week's news, signalling the industry is finally moving from covenant compliance to genuine innovation. This occurred as the government launched a major consultation into sustainable investment labels, adding a new layer of complexity and opportunity for product design.
A Year of Resilient Returns Sets the Stage
Superannuation funds across the board have reported impressive annual returns, defying earlier predictions of market volatility. Resilient share markets were the primary driver, with the median balanced option returning around 9.8% for the financial year. Several funds delivered standout results, with Hostplus’s balanced option returning 11.2% and Australian Ethical’s MySuper product delivering 10.5%. The strong performance was not limited to industry funds, with CFS and AMP joining the top 10 performers, demonstrating a competitive resurgence from the retail sector.
This positive performance has allowed funds to maintain a long-term investment focus despite ongoing global uncertainty. Rest Super confirmed it remains committed to its strategic allocation to equities, while investment leaders emphasised the importance of diversification and active management to navigate risk. The strong returns have also been a boon for AMP, which reported its first positive superannuation net cash flows since 2017, a significant milestone in its post-Royal Commission recovery.
The Race to Innovate in Retirement Income
With the accumulation phase on solid footing, the industry’s attention has pivoted decisively to the decumulation challenge. This week saw a surge in product development and strategic thinking aimed at helping members transition into retirement. In a significant move, MLC announced a partnership with TAL and Challenger to launch an innovative solution that blends account-based pensions with different types of annuity products, offering advisers a new tool to manage longevity risk.
AMP’s North platform also made a significant push into the retirement space, expanding its managed accounts offering with new portfolios explicitly designed for retirees. The platform has seen a 60% jump in inflows, with its retirement focus resonating with advisers who, according to new research, prioritise service quality over fund size when selecting products. This innovation push is supported by new research from Vanguard, which found that access to more personalised data can significantly boost retirement outcomes, reinforcing the value of comprehensive financial advice.
Policy Headwinds and New Frontiers
While product innovation accelerated, the policy landscape remained complex. The controversial Division 296 tax on balances over $3 million continues to cause concern, with retirees expressing disappointment and advisers highlighting its impact on insurance needs within super and estate planning. In a separate but related issue, consumer advocates have called for a "root and branch" review of insurance in superannuation following a claims-handling dispute involving Australian Retirement Trust.
The most significant new policy development was the government’s launch of a consultation on sustainable investment labels. The proposed framework aims to create a standardised, trusted labelling system to help investors navigate ESG products and combat greenwashing. This comes as Australian Ethical reported its funds under management grew by 34%, highlighting strong consumer demand for sustainable options. On the operational front, Westpac announced it will roll out real-time super payments for employers in September, a key step towards the industry-wide move to payday super.
Context, Looking Ahead & Takeaways
This week marks a critical turning point for the superannuation sector. While strong FY25 returns were a dominant theme in previous weeks, the narrative has now firmly shifted to how funds are using this stability to address the long-standing retirement income challenge. The wave of product innovation is a direct response to the regulatory pressure of the Retirement Income Covenant and APRA's recent publication of retirement product performance data. The government's new focus on sustainable finance labelling opens a new front for product development and regulatory compliance, moving the ESG conversation from a niche concern to a core design principle.
Looking ahead, the uptake and performance of the new generation of retirement income products will be a key measure of the industry's success. The consultation on sustainable investment labels will be a significant focus for product teams, with the final framework set to have a lasting impact on the market.
Key Takeaways:
- Short-term (0–3 months): Financial advisers must rapidly get up to speed on the new, more complex retirement income solutions being launched by providers like MLC Super and AMP North. Understanding how these products blend different features will be critical for meeting the best interest duty.
- Short-term (0–3 months): Superannuation trustees should benchmark their current retirement income strategies against these new market offerings. A passive approach to the Retirement Income Covenant is no longer sufficient.
- Medium-term (3–12 months): Product providers and asset managers must actively engage with Treasury’s consultation on sustainable investment labels. The outcome will fundamentally reshape how ESG products are designed, marketed, and regulated.
- Medium-term (3–12 months): All funds must review their insurance in super arrangements and claims processes. The call for a comprehensive review suggests this will become an area of increased regulatory and public scrutiny.
