VicSuper claims to have launched Australia’s first ever public offer comprehensive income product for retirement (CIPR) in partnership with annuity provider Challenger.
The offer combines a pension product created by VicSuper’s in-house team with a flexible guaranteed fixed income product from Challenger created after feedback from VicSuper members. VicSuper currently has 20 per cent of its $15 billion assets in the retirement phase, a proportion that is expected to grow rapidly.
The CIPR will be distributed by VicSuper’s 50-strong adviser team, who will help members tailor a mix of guaranteed income and age pension to cover their basic needs, and VicSuper’s pension product to cover their ‘wants’, as stated in its marketing. The marketing emphasises the personal choice, using the phrases “Your retirement, your way” and “Retirement you’re the boss”.
The flexibility and the element of income guarantee to cover longevity risk meets the requirements of a CIPR as outlined in the Financial System Inquiry’s final report to the Coalition Government in December.
Michael Dundon, chief executive of VicSuper, said: “We have spent several months researching and talking to our members finding out what is important to them. This product has been designed with that in mind.”
He would not be drawn on what specific take-up target the fund was aiming for, but he hoped it would be a “significant proportion” of retired members. Take-up of other super fund products has disappointed and Dundon thought the role of advisers and the flexibility of the solution would make a difference.
The choice of Challenger as a partner is a set-back for Mercer’s Lifetime Plus product, which Dundon had endorsed at its launch in October. At the time, Dundon said the product was being considered as part of the solution that was eventually launched this week. Yesterday, Dundon held a joint press conference with Brian Benari, chief executive of Challenger to launch VicSuper’s CIPR solution.
Benari said the VicSuper annuity had been built from the ground up and was not yet available anywhere else in the market.
VicSuper will offer two guaranteed income accounts, a lifetime annuity and a fixed term annuity anywhere between one to 40 years. Each can be paid either as monthly, quarterly, half-yearly or yearly payments. The products will have a one off administration fee with no ongoing fees.
Optional extras include a lump sum payment at the end of the fixed term annuity, inflation protection, the nomination of a partner to receive remaining benefits on death of annuity holder and a timeframe when beneficiaries can be paid an income on death of annuity holder.