Nine industry superannuation funds are working with Frontier Advisors, an independent asset consultant which provides advice to institutional investors across the superannuation, charity, public sector and higher education sectors, to explore new longevity risk products for retiree members, which could include tweaking account-based pensions.
The working group’s key takeaway for product design of a retirement income solution is: the primary goal is a stable income via an account-based pension, with a longevity element, reported Financial Standard.
Frontier Advisors principal consultant and head of member solutions David Carruthers told Financial Standard that currently, retirees are implicitly using about 30% of their account based pension balances as a form of self-insurance/longevity protection by drawing down less when they are in early stages of retirement.
He said that the funds could either create a collective pool of all their members to manage longevity risk or they could develop specific products.
“Difference to what we are doing is that it is designed by the funds and is something that [funds] collectively support, rather than designed by the product provider trying to understand what the funds and members want from the outside,” he said.
An industry superannuation fund is originally established to provide for the retirement of workers in a specific industry. They are mutual funds and membership-based.