Optimum Pensions was launched with a single mission - to help Australians lead a comfortable retirement. Its lifetime income stream solution, the Real Lifetime Pension, comprehensively addresses longevity risk offering Australians an option to be self-sufficient in retirement no matter how long they live.
"Superannuation is about the provision of pensions in retirement": Q&A with Optimum Pensions' Peter Rowe September 2019
Peter Rowe is general manager at lifetime income solution provider Optimum Pensions. One year on from the launch of the firm's Real Lifetime Pension product, he speaks to Industry Moves about the level of engagement from superannuation funds and the solutions they seek when it comes to providing income streams to members. He also reminds us about the need for funds to change their focus from just the accumulation stage, and reiterates his lack of surprise at the revelations of the Banking Royal Commission.
- What has the interest in the product been like for its first 12 months?
Initially, when funds thought they were going to have to introduce CIPRs (Comprehensive Income Products for Retirement) there was quite a bit of interest but then the Royal Commission and the Productivity Commission got in the way. This was then followed by funds having to deal with the Protecting Your Super changes.
However, over the last few months, the level of engagement by funds has increased significantly. Some have been working to get a better understanding of their membership and others are carrying out modelling and investigating available options. It has been pleasing that funds have welcomed us back in to provide further information.
"It has been pleasing that funds have welcomed us back in to provide further information."
- Do you think this is at least partly in response to the Superannuation Productivity Commission report and the Banking Royal Commission (and the resulting search for unconflicted product)?
I think it has more to do with the requirement to look at Member Outcomes more closely and the push to require funds to develop a Retirement Income Framework. Several funds are now working through the options that are available, including Optimum Pensions. The development of unconflicted retirement income solutions that funds can offer in their own right is quite powerful. Since the Optimum Pensions solution is a white label option, funds can safely offer it to members as their own product and the funds will continue to manage the investments on behalf of the members.
"Since the Optimum Pensions solution is a white label option, funds can safely offer it to members as their own product and the funds will continue to manage the investments on behalf of the members."
- Have many super funds have signed up to offer their members a Real Lifetime Pension?
None as yet, but I believe that we are getting much closer, with several now signing Non Disclosure Agreements and we are beginning to see Board engagement in the process. We believe that some funds are now close to shortlisting options and we hope to be part of those lists.
- How do they explain to their members what it is and how it works?
The Optimum Pensions solution is not designed to just use the Real Lifetime Pensions (RLP) and / or Deferred Real Lifetime Pensions (DRLP). It works best to provide a comprehensive solution by utilising the existing Account Based Pensions already offered by funds. This means that members will continue to have access to capital while securing a lifetime income stream. To assist members understand this, we are able to provide funds with training and support, including a simple to use calculator that allows advisors or members to mix and match Account Based Pensions with RLP and / or DRLP for individuals or couples.
"People insure their house, their car, and health. In this case they are insuring a lifetime income."
People have an opportunity to buy a RLP and/or a DRLP and secure a lifetime income by using part of their superannuation. It can be seen as another form of insurance. People insure their house, their car, and health. In this case they are insuring a lifetime income.
While the IP of how the RLP works may be complicated for the average person, the concepts are relatively simple to explain. A good way to look at this is that generally, people don’t understand the complex workings of a car, but they still buy them. They understand what the car is supposed to do, and in this case they can understand what the RLP will provide.
- On the issue of longevity, what did you think of the Superannuation Productivity Commission report's recommendation to reassess the need for a retirement income covenant?
I think the fact that the Government has announced its intention to conduct a review following the election sends a clear signal that the idea of a retirement income covenant or framework becomes a must for superannuation funds.
After all, if funds just continue to focus on the accumulation stage they are not really fulfilling the obligation to provide sustainable retirement benefits. While it is easy to focus on the word “super”, we cannot ignore the fact that superannuation is about the provision of pensions in retirement, not just savings during a member’s working life.
- What was the most surprising revelation from the Banking Royal Commission for you?
To be honest, I wasn’t really all that surprised by the Royal Commission’s findings. I think most people knew or suspected that there were issues and practices that needed to be uncovered. For me, what was pleasing was the willingness to expose some of the long-standing issues so that these can be tackled. I think the reform has started but there is still some way to go.
Industry Moves previously spoke to David Orford, Optimum Pensions' managing director, following the launch of the Real Lifetime Pension product in 2018.
You can read that interview here: A solution for Australians' longevity issue.