TelstraSuper and Challenger unveil retirement income offering

TelstraSuper has unveiled a new retirement income product, which is understood to be the first profit-to-member guaranteed lifetime income stream since the commencement of the Retirement Income Covenant.

Designed in partnership with Challenger following an announcement in August, the fund’s RetireAccess Lifetime Pension is designed to give retirees more confidence to spend their income without fear of their savings running out or being eroded by inflation.

The product “provides a guaranteed income for life”, the fund said, with the option of being indexed for inflation or market-linked and blended with a member’s existing account-based pension.

A typical scenario could be a retiree investing a third of their retirement savings into the Lifetime Pension, with the remaining 70 per cent invested in the fund’s account-based pension.

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Chris Davies, TelstraSuper chief executive, called the Lifetime Pension” the final piece in the retirement puzzle.”

“We know that many retirees are living more frugally than they need to because they fear their savings won’t last the distance or that their spending power will be eroded by higher costs of living,” Davies said.

“Our Lifetime Pension provides a layer of income protection whilst also helping to maintain savings when used in conjunction with an account-based pension from the fund.”

It has built-in protections to ensure members retain access to capital over a long period, based on life expectancy. If they need to withdraw, or if they pass away during the withdrawal period, access will be available.

Challenger’s CEO and managing director, Nick Hamilton, said: “We are delighted to partner with TelstraSuper on the first profit-to-member guaranteed lifetime income stream since the commencement of the Retirement Income Covenant. 

“This innovative partnership has enabled TelstraSuper to offer its own CPI and market linked lifetime income streams as part of its broader retirement offering.

“Australians face a unique set of risks in retirement and it’s critical we work together as an industry to ensure retirees have the options to feel financially secure and confident to spend their retirement savings as they see fit.”

Additionally, TelstraSuper’s new offering would be particularly beneficial for part-pensioners or those just missing out on the pension, as only 60 per cent of the amount invested counts towards the age pension assets test until age 84, or for a minimum of five years, after which only 30 per cent counts. 

Davies noted: “Under most scenarios, asset-tested part-pensioners taking out a Lifetime Pension will see their age pension payments increase, and for some retirees it could enable them to qualify for a part-pension and the associated Pensioner Concession Card that comes with a range of benefits.”

He expected the Lifetime Pension to prove particularly popular with a large portion of the fund’s members who are retirees who also qualified for the age pension. 

“We think this income-layering approach – whereby our members can effectively draw income from three sources: an account-based pension, the Lifetime Pension, and the age pension – will become increasingly popular as more people recognise the potential financial and lifestyle benefits of this strategy,” he said.

The new product complements other recent enhancements to TelstraSuper’s retirement offerings.

These include a new high growth investment option and extending access to the fund’s self-managed platform Direct Access.

Earlier this year, the fund also announced it would provide aged care funding advice through TelstraSuper Financial Planning. With this, members can receive advice on strategies to fund aged care for themselves or family members.