QSuper has partnered with Challenger to offer a new guaranteed-term annuity, the first for the superannuation fund and exclusive to its members.

The product, which is available to members through QSuper or its financial planning business QInvest1, will provide a very competitive earning rate on term annuities, according to Michael Pennisi, chief strategy officer at QSuper.

QSuper says members and their partners will be able to purchase an annuity using funds from personal savings or funds from their superannuation if they are 60 years of age or older.

The product is primarily targeted at the post-retirement market, but it’s a flexible offering, says Pennisi.

“We will enable people to invest non-superannuation monies and that is obviously not in the retirement market, but predominantly retirees.”

Pennisi says providing an annuity product is consistent with how the super fund, which has roughly more than $40 billion of funds under management and 540,000 members, is thinking about how members should live in retirement.

QSuper contemplated a life annuity versus a term annuity, and took guidance from member preferences and the general market.

“We know that the vast majority of the annuities that are sold in market are term annuities. We know that the vast majority of people who become our members or see QInvest are seeking a term annuity versus a life annuity. So we landed on a term annuity between one and 50 years.”

He says the superannuation industry is approaching a mature stage, so the focus has been on developing products to help people into retirement.

“I think the GFC was a very big wake-up call for a lot of people in the industry and obviously the people who were affected by it, and what we do in the accumulation phase has a very, very big impact on how people live in retirement.”

The product is the culmination of approximately eight months’ work, and part of QSuper’s thinking on developing lifecycle options.

QSuper’s product suite includes an allocated pension account, and Pennisi says the fund will shortly be applying for a MySuper licence with its Lifetime Option becoming the default product.

Boards have to deliver on MySuper
QSuper will be applying for a MySuper licence for its QSuper Lifetime Option, and Pennisi says under the MySuper regulations and prudential standards, the product delivered to market should be sustainable, meet members’ needs and adequately disclose members’ options.

“I think it’s up to every trustee board, and I know that they are thinking about this, that they deliver the right product to their members and it is delivered within the legislative constraints,” he tells IM Online.

The fund has taken some very big steps to move away from the general market in terms of its thinking in this area over the last 12 to 24 months.

“We don’t, when we look at our investment strategies, consider peers. We don’t believe that’s the benchmark that we should be looking at. It should be about how are we delivering the objectives that we promised to our members,” Pennisi says.

“And it’s also the reason that you won’t see QSuper’s default options in any ratings, because again, we’re not focused on what the competition is doing. We’re focused on outcomes for members.”

For further indepth discussion of effective retirement solutions, join us at the Post-Retirement Conference, a Conexus Financial event in association with AIST on March 5, 2013 in Melbourne. For further information, click here.

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