The superannuation industry is on a steep learning curve on what success looks like in post-retirement product development.
Case studies from Equip Super, NGS Super and MTAA Super at the 7th annual Post-Retirement Conference in Sydney heard feedback of investment success, adjustments and low take-up.
Early indications show the NGS Super pension product, the most traditional of the three products, to have been initially successful. It has seen a 11.5 per cent return over 13 months, paying out a 6-6.5 per cent income for members and thereby leaving a 5 per cent gain over that period.
The product which is managed in “prudently” chosen growth assets, such as high income yielding equities and property has benefited from an upswing in the investment cycle admitted Anthony Rodwell-Ball, chief executive of NGS Super.
It has also more than met its targets on volatility, with only cash and term deposits having a lower rate of volatility over the same time period.
Designed to meet members’ longevity profile with a “prudent” exposure to growth assets, it is not guaranteed to meet its target 6 per cent income – NGS Super has ruled out the use of annuities and lifecycle funds.
Despite the relative success of the product Rodwell-Ball was downbeat on whether it was catering for all his members’ needs, partly as it has received low take-up.
“We have products in the pipeline, they won’t meet everyone’s needs but you have to start somewhere,” he said in a comment that was reflected by many other speakers at the conference.
In the same conference session, Danielle Press, chief executive of Equip Super, revealed learnings from her fund’s MyPension product.
Requests from members have led Equip Super to allow the prescribed income from its MyPension product to fall as low as the statutory minimum of 4 per cent – its initial setting was only for 7 per cent.
Press felt this was too low and raised questions about the intention of superannuation. “We have people on balances of $450-$480,000 who want to live on a 4 per cent income, live frugally and leave money for their kids,” she said. “I am not sure that is right.”
She added that Equip would introduce products to match the range of account balances of members.
One of the first funds to bring an innovative pension product to market was MTAA Super. It negotiated a deal with MetLife to offer a tailored annuity product, dubbed RetireSafe, that paid a fixed income for five years and thereafter a variable income that allowed for investment growth. Other product features were the allowance of one off capital drawdowns and the bequest of remaining capital to relatives upon death.
Leeanne Turner, chief executive of MTAA Super, revealed how the product had suffered from low bond yields since its launch in 2013 and had gained only 15 policy holders. The product has also suffered from MetLife’s decision not to write anymore annuity business in Australia in 2014 and the insurer is now believed to want to end its partnership with MTAA Super when the three year agreement concludes at the end of this year.
Turner described the experience as a learning curve that would benefit the scheme in the future in its choice of retirement products.