Aware Super has selected Challenger as its partner to provide a de-risking solution for its defined benefit fund.
Challenger will provide a group lifetime annuity policy to the value of $619 million that will derisk the fund’s lifetime pension liabilities from investment, inflation, and longevity risk.
This will commence from 31 July 2023 and cover 3,000 members and more than 100 employers, mostly in the Victorian public healthcare space.
Aware has made a short-term Index Plus investment in the fourth quarter of the financial year 2023 to help fund the group lifetime annuity and manage the investment transition.
The super fund has 1.1 million members and $160 billion in assets under management.
Challenger managing director and chief executive, Nick Hamilton, said: “Aware Super is a highly valued, long-term client and we are delighted to partner with them to support their defined benefit fund.
“This announcement builds on that relationship and highlights the depth of Challenger’s institutional capability and strength of our investment and longevity risk solutions.
“With the Australian savings market now very focused on retirement, the opportunity for Challenger to support the industry with guaranteed income solutions, managed and regulated in Australia, is significant.”
Chief investment officer, Damian Graham, said Aware is always trying to find innovative solutions to achieve the best possible member outcomes.
“We are delighted to partner with Challenger, a recognised leader in this space, for what is the largest annuity buy-in in Australia,” Graham said.
“This partnership has enabled us to reduce the risk of future pensions for about 3,000 Victorian members in Aware Super’s defined benefit fund, which is critical in this inflationary environment.
“Through this innovative derisking solution, we are protecting our defined benefit pension members from investment, inflation and longevity risks and locking in future cash flows, providing greater certainty to their retirement income.
“It is a win for all our stakeholders: for the defined benefit pension members – primarily from the Victorian public health sector – who will have confidence in their retirement income and the Victorian state government and more than 100 employers whose uncertainty around future funding requirements will be alleviated.”
In its FY22–23 results, Aware’s default MySuper Lifecycle delivered returns of 10.7 per cent and 9.3 per cent per annum over 10 years.
Laura, for whom is this group annuity providing the ‘de-risking’ benefits?
It is more likely that it is the employers, rather than the members. Or do you have further insights into that? I would love to know.