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An increase in diverse partnerships with financial service providers is likely as super funds attempt to develop attractive post-retirement products, the Post-Retirement Conference heard.
These partnerships will likely include fund managers, insurers and investment banks as well as larger funds offering products to smaller funds.
Nicolette Rubinsztein, general manager of retirement and advocacy at Colonial First State Super, said that there are lots of different ways to produce products. Some funds will do everything in-house and develop their own options, others will completely outsource and their pre-selection option will be a separate product, and some will be develop a product in-house but outsource the administration.
“If you wanted to do something like group self annuitisation then scale would be very important, but for the smaller funds partnering with providers is a very viable options and we’ve seen some funds do that already.
“We’ve seen the Mercer groups self annutiastion product that’s the first one coming to market, and it is quite innovative, but I think a lot of funds will want the security of a life company because communicating to members when you have certainty will be very valuable,” Rubinsztein said.
She believes, consistent with sentiment in the Financial System Inquiry (FSI), that members will want to go into an account based pension and an annuity concurrently.
Professor Kevin Davis research director at the Australian Centre for Financial Studies was supportive of this view believing that multiple products might be an appropriate option for members. He said that funds are muddling through how to provide post-retirement products, with Steve Freeborn, head of superannuation and investments at Rice Warner, adding that funds need to start somewhere and this was part of an evolution.
“The superannuation industry has been a magnet for fund and management products and that’s not going to stop with (post-retirement) product innovation,” Freeborn said.
Great – funds are “muddling through” and on “steep learning curves” …. doesn’t give me much confidence. Its not like the idea of post-retirement income is new to them and I expect more sophistication and downright professionalism from a $1 trillion dollar industry.