She adds the fact the investor can’t withdraw a portion of their super until they’re 80 is a positive thing that “gives them certainty in their later years”. She also underlines that the product is more attractive to those with longevity in the genes. But product innovation has really only just begun. The US has already seen a variety of managers develop new products addressing retirees’ concern that their personal finances can last the distance.

A US-based Vanguard actuary was recently in Australia spruiking the next generation of retirement products yet to be released here by the index manager, described as a hybrid product of annuity and account-based pension. Vanguard’s Australian head of retail, Robin Bowerman, says at its simplest the product is a market-linked pension with an insurance wrap. “It guarantees a reasonable amount of money for life, so it has the security of an annuity, but it has the flexibility, allowing access to your funds, that a normal [pension] fund would give you,” he says.

Bowerman admits the big issue with such a product is cost. Theoretically, its pricing could prove difficult for some investors to understand as it is difficult to value a guaranteed income, and the product would necessarily be more expensive than a simple account-based pension. Fund trustees should be concerned with how their members decumulate, Bowerman says, and providing access to sensible education and financial plans was part of a trustee’s role. “Financial advisers are going to play a critical role [in addressing longevity risk],” he says.

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