Group self-annuitisation products (GSA) could be the supplement to superannuation to give retirees the confidence to spend in retirement, according to QSuper.
The super fund’s latest whitepaper on retirement security said it was important for funds to address the issues that arose from the reluctance to annuitise retirement wealth.
It said GSAs, or pooled annuities, provided members with lifetime income by sharing longevity experience within a pool and this almost eliminated individual longevity risk.
“Pool members will still face some level of systematic longevity risk, if the whole population is living longer, although this can be managed through income adjustments,” it said.
“A simple GSA structure will involve the fund setting initial payments based on assumptions to expected mortality rates, investment returns, fees and costs. Subsequent payments will be adjusted to reflect actual investment returns and mortality.”
QSuper noted that GSAs could be cheaper than traditional annuities as there was no requirement for the super fund to hold capital. Unlike a life company, a fund could invest in any of their investment options with a long-term record.
QSuper said GSAs could:
“If a GSA meets certain government legislation, members may be entitled to the discounted treatment in the assessment of their assets and income tests for the Age Pension. This legislation is called the capital access schedule, placing a limit on the amount of money one can access from a product, either through voluntary exit or in the event of death,” it said.
“If a GSA is designed to meet this limit, then retirees will receive this discount on their asset and income assessment for the means test. This discount may enable retirees to receive the Age Pension, which they otherwise may not have been entitled to, or receive a higher level of Age Pension than they ordinarily would.”
New research has shown Australians are retiring at their oldest age in over 50 years.
The $300 billion fund has announced the development of a new flexible lifetime income option in partnership with TAL.
As regulators spur funds to focus on Australia’s ageing population and overseas players voice their interests, professionals expect a boost in innovative activity in super.
Over half of Australians hope to live to 100 years, according to MetLife, and 90 per cent believe retirement should be redefined to account for a longer lifespan.
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