REI Super has launched a new dual-account lifecycle default strategy, which will balance growth and risk exposure of members in line with their age, as it works out how to deal with the growing life expectancy of its member base.
The new strategy would be the default for new entrants to the industry fund’s retirement pension and transition to retirement pension, and existing pension members could opt into the structure.
The strategy would split members’ accounts across the fund’s cash and balanced options with the breakdown between the two dependent on age. The cash option was designed to protect capital for draw-downs during retirement, with the balanced option being the fund’s MySuper default growth-based portfolio.
For members invested in the strategy, their account would be managed as follows:
|
Age |
Cash Option |
Balanced Option |
|
Under 65 |
8 per cent |
92 per cent |
|
65-74 |
10 per cent |
90 per cent |
|
75-79 |
12 per cent |
88 per cent |
|
80-84 |
14 per cent |
86 per cent |
|
85-89 |
18 per cent |
82 per cent |
|
90-94 |
22 per cent |
78 per cent |
|
95+ |
28 per cent |
72 per cent |
Members’ accounts would be rebalanced annually in line with the above age-based structure to ensure a minimum balance in the cash option is maintained.
REI Super chief executive, Mal Smith, said that the “simple yet practical default arrangement” would cater to growing longevity of retirees.
“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,” he said.
“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.”
Smith acknowledged that some members would still want freedom in managing their investments and said that the new default structure would exist alongside this.
“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.”
