Budget will prompt new pension products
Implementation of the Federal Budget superannuation initiatives will result in intense competition between fund managers to develop pension products that attract and retain clients aged over 60, according to industry experts.
John Trowbridge, chair of the Superannuation Tax Reform Task Force of the Institute of Actuaries of Australia, said the “new type of competition” would be driven by the proposed removal of end-benefits tax.
“All funds will probably end up offering new products and services to people over 60 and, in turn, these people will possibly be attracted to those funds with the most interesting products and services.”
He said the new types of pension products would be designed to both help people manage their day-to-day cash position and their income streams.
Trowbridge added: “These products will likely be based on operating a bank account around their super fund, such as a cash management account, because people will be able to put money in and take money out of their super at will.”
There will also be a demand for these people to manage their income streams through various kinds of annuity type products, he said, and a “whole new gamut of these products will emerge in time as some of the old ones disappear”, he said.
“This new product development would remain in an experimental stage for a while, as managers try and identify those products that have consumer appeal. Under the simplified rules of the new dispensation, the search will be on by product creators to identify what people over 60 need, what they want, and what they will buy.”
Investment and Financial Services Association (IFSA) chief executive Richard Gilbert expects the industry to ramp up marketing to those close to retirement age, as well as the products and opportunities for these savers.
Gilbert described the proposed changes as a “no-brainer” message for people to save for retirement and, of course, companies will respond with increased products and services.
Chant West chief executive officer Warren Chant said the proposed changes make “a compelling case for funds to have a good allocated pension, because now there is an equally compelling reason for members to stay in their fund until 60”.
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