Michael Pennisi
A new pension product, released to members by QSuper, is designed to help retirees spend their superannuation with confidence that they won’t run out of money later in life.
The pioneering product aims to maximise retirees’ cashflow converting their retirement savings into tax-free, fortnightly income, no matter how long they live. Launched to members on March 1, many retirees purchasing this product will also be eligible for more Age Pension as it provides an immediate 40% assets test discount.
The QSuper Lifetime Pension was flagged to a limited number of members mid last year and over 600 registered their interest in knowing more prior to launch.
A $100,000 investment provides first-year tax-free income of $6,164 to a 60-year-old, $7,529 to a 70-year-old and $10,834 to an 80-year-old, with slightly lower rates available to provide lifetime income for a spouse as well.
The Lifetime Pension is linked to QSuper’s Balanced investment option, enabling it to offer much higher rates of income than traditional annuities currently available in Australia.
An annual adjustment to the income payments, based on the financial performance of the Lifetime Pension pool, also ensures that payments can be made for life in any circumstance. This is also designed to support increasing payments over time to assist with rising costs of living.
The Lifetime Pension meets the challenge set out in the Federal Government’s Retirement Income Review – development of products that allow retirees to spend their superannuation with confidence.
The main features of the product include:
- Fortnightly payments, adjusted annually and designed to increase over time;
- Money-back protection, which assures members that if they die before receiving their purchase price back as income, their beneficiaries will get back the difference (subject to a legislated maximum in limited circumstances);
- Optional Spouse protection which provides the surviving partner of a relationship with an income for life;
- A 6-month cooling off period so retirees can decide if the product is right for them;
- Age pension benefits – retirees receive a 40% discount on the Age Pension assets test for monies used to purchase. This means retirees may receive higher Age Pension payments than they may otherwise have qualified for, or potentially be eligible for the Age Pension and Commonwealth Pensioner Concession Card, if they were previously ineligible.
QSuper, formerly the Queensland public sector fund, is open to all Australians. With 600,000 members and $120 billion in funds under administration, it is the third largest fund in the country.
QSuper was SuperRatings Fund of the Year for 2021 and SuperRatings Pension Fund of the Year for 2019, 2020 and 2021.
QSuper Chief Executive Officer, Michael Pennisi said the product had been developed in response to member need.
“We are conscious that our members, like all retirees, can live too frugally for fear their money will run out. This has been a major worry for senior Australians. This product is designed to provide retirees with more income in retirement and the confidence that they will have income for life,” he said.
“We have worked on this for a lengthy period, drawing on overseas experience and closely working with regulators and legislators to create a product unique in Australia.
“It provides a regular income and helps them enjoy the retirement they deserve.
“The Retirement Income Review has rightly called out the need for such products and we’re pleased to be the first major superannuation fund to meet it.
“The warmth of reception when we have explained it to our members supports our efforts and reinforces our confidence in this being a valuable part of retirement planning.”
QSuper’s modelling provided to members shows how the lifetime pension, in tandem with the aged pension and a retirement income account may even out a retiree’s income over their life.