“The vital thing, particularly in retirement, is for members’ super savings to stay invested in a way that is relevant to their investment timeframe.” – Mal Smith, REI Super CEO.
This month the industry fund for real estate employees launched a new default investment option for its pension members, with different investment mixes applying to members in different age brackets. This is now the default investment arrangement for new entrants to the Fund’s Retirement Pension and Transition to Retirement Pension. Existing REI Super pension members can also opt into the structure.
The new offering for pension members has two distinctive features: it splits members’ accounts across REI Super’s Balanced and Cash investment options and it does so in set proportions, depending on the age of the member.
It is a needs-based, dual account investment strategy designed for members who do not wish to actively manage their own investment mix. For these members the Fund divides their account across two distinct portfolios:
- The Balanced option, which is the Fund’s MySuper default growth-based portfolio – designed to meet longer term capital growth needs, whilst providing some protection against inflation and longevity risks and
- The Cash option, a cash-based portfolio – designed to protect the capital from which members are drawing their shorter-term income needs in retirement.
“We’re very pleased to be able to offer such a simple, yet practical default arrangement to our pension members,” said REI Super CEO Mal Smith.
“In constructing both a growth and an income component, it considers retired members’ increasingly long life expectancies, as well as their need for a measure of certainty and access to secure income.”
“And importantly, we’re tailoring this arrangement to a member’s age, gradually increasing their exposure to cash and reducing their exposure to growth style assets as their investment timeframe shortens.”
How it works
When a new member opens an REI Super Pension and doesn’t choose their own investment mix from REI Super’s range of ten options, their account will be invested as follows:
|
Age
|
Cash Option
|
Balanced Option
|
|
Under 65
|
8%
|
92%
|
|
65-74
|
10%
|
90%
|
|
75-79
|
12%
|
88%
|
|
80-84
|
14%
|
86%
|
|
85-89
|
18%
|
82%
|
|
90-94
|
22%
|
78%
|
|
95+
|
28%
|
72%
|
Regular pension payments (and partial lump sum payments or commutations) are made from the Cash option, followed by the Balanced option in the event the portion invested in the Cash option has insufficient funds.
To ensure a minimum balance in the Cash option is maintained, each member’s account will be rebalanced annually in line with the above age-based structure.
In recent years, some funds have moved to adopt age-based or “lifecycle” funds for their default accumulation members. The approach is a much less common offering for pension members, however.
The industry is still working through a range of product design issues for pension members, including the question of whether it is appropriate and cost effective to provide investments with guaranteed returns or income payments.
“Guarantees will always come at a cost to members. At this stage, we don’t think they’re necessary for our pension members. But the vital thing, particularly in retirement, is for members’ super savings to stay invested in a way that is relevant to their investment timeframe”, said Mal Smith.
“We appreciate that one size cannot fit all with pension members’ default investment arrangements.”
“Our pensioner members who wish to be highly engaged can still mix and match any proportion of their balance. For other members, the default structure provides a regular automatic rebalancing of their portfolio to meet their short-term income drawdown needs.”
Media contact: 03 9629 6556
Past returns are no guarantee of future performance, and investment returns of less than one year should not be relied upon as any guide to future performance. This information may be general advice, which does not take into account your personal objectives, situation or needs. Before making a decision about REI Super, consider your financial requirements and refer to the relevant Product Disclosure Statement (PDS). REI Superannuation Fund Pty Ltd ABN 68 056 044 770, AFSL 240569, RSE L0000314 Trustee of REI Super (ABN 76 641 658 449), RSE R1000412