Wealth manager AMP has launched a hybrid retirement solution incorporating a market-linked income stream with guaranteed lifetime bonuses that it hopes will give confidence to retiring Australians to spend their superannuation savings without fear of running out.
The MyNorth Lifetime has the characteristics of an account-based pension with the certainty of a lifetime cashflow similar to an annuity. The client will have access to AMP’s 700 investment choices to create an income stream higher than what is typically afforded by either product. The design of this product also goes some way to mitigate longevity risk as the retiree will be paid an annual bonus guaranteed by life insurer TAL and calculated as a percentage of the account balance.
Ben Hillier, general manager, retirement solutions at AMP said the average Australian dies with 90 per cent of their superannuation balances unspent and MyNorth Lifetime will help retirees live comfortably over the course of their lifetime.
“We are helping retirees spend better. We also need to solve longevity risk and [that is why] we have partnered with TAL,” he said.
The solution will cost 10 basis point annually and a $91 annual account fee. The cost of the bonus paid by TAL is the residual account balance after the payments of an option death or exit benefit.
AMP is only distributing the product through its North platform due to the complexity involved and advisers have to undergo specialist product training that will be rolled out nationally.
The firm’s market share of the financial planning industry has shrunk dramatically since the damning Hayne royal commission with less than 1,000 financial planners on its books. Notwithstanding the smaller footprint, the firm is positioning to be a leader in retirement which may be viewed as less risky in a post-Retirement Income Covenant landscape, backed by its advised model.
“Working closely with advisers to provide more retirees with this confidence is a priority, and we’ll continue to work with advisers as we invest in North, including its investment menu and functionality,” said Edwina Maloney, director, platforms.