The open fund, whose members are predominantly public servants and their families, said it would not reveal how the product would work until it was ready to release it to members, but said it stood by the claim that it would never run out.
The account is being developed to overcome a major issue for retirees and their families brought about by restrictive rules that determine a minimum amount that can be withdrawn from accounts. The rules mean that retirees often get nowhere near spending the entitlements and superannuation becomes an inheritance for their children rather than a pension.
Initial plans for the account indicate it would work in conjunction with the age pension and the already-available income accounts to give a third source of funds and create “a lifetime pension”.
Chief investment officer Charles Woodhouse recently told members that one of the quirks of the government’s income rules was that people were forced to take out more income the older they got. They were often forced into compromising their lifestyle at a younger age so that they could continue to retain funds.
“Regular income in retirement is often lowest when it is most needed and higher later in life when you are generally less active and spending less,” Woodhouse said.
“We are developing a third source of retirement income to use together with the existing age pension and an income account – a lifetime pension.”
He said the option would allow people to purchase “a lifetime pension with a regular income that never runs out (and) may even increase age pension benefits”.
Chief executive Michael Pennisi said retirement brought significant risks for people. They could run out of funds during retirement or live quite frugally in retirement for fear that they were going to consume all of their retirement savings prematurely.
“To address this risk we are working hard in the background to develop a product to provide greater confidence to members and to deliver an income stream, such that they can have comfort that their retirement savings will be there for their whole retirement.
“Now, this product still has some way to go before we are able to share details with you, but it is looking quite promising.”Jump to next article