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Super funds need a suite of CIPRs

Dan Purves




Super funds need to have a suite of comprehensive income products for retirement (CIPRs), as no single product can solve all risks for all members.

Risks such as sequencing, adequacy, longevity and liquidity are all interrelated, and as soon as one issue is solved, another is created, Peter Robertson, chief executive of Maritime Super, told delegates at the Post Retirement Conference in Sydney yesterday.

He added the challenge was finding the best way to work on each of them without causing another risk “to explode”.

“We’ve looked at this for decades and, believe me, there is no way to put one product in place which will suit everyone. Even if you build a product for the average member, by definition it suits basically nobody. It’s just not easy,” said Robertson.

He added the super fund’s measure of success in post-retirement is whether members stay in the growth option.

To this end, Maritime Super use a Milliman overlay product placed over its growth and balanced funds as a member option, which they can opt in and out of as they wish.

“What we’ve found is a lot of our members, even from our [defined benefit] funds, have taken a look at that and said, ‘Look, I see what you are trying to do. If we can remain invested in growth assets to address the longevity risk, and if we can address sequencing risk through some sort of insurance, which isn’t going to cost us the earth, then we can hit two of the risks all of a sudden, and hit them well’,” Robertson said.

Damian Graham, chief investment officer of StatePlus, said when considering investment strategies in post retirement his fund started by looking at the return pattern, as they felt that supported the requirement to draw down income.

“The idea again is the holistic approach to investing in retirement, to think about the return streams differently, but also the definition of risk. Whatever the CIPR looks like, the success of being able to deliver a retirement solution is the ability to think about risks differently for the retiree than an accumulator.”

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    He added the most active decision the super fund had made was to move away from what peers were doing.

    “The nice thing about focusing on retirees is that it’s bespoke individual outcomes, you don’t need to worry about peer groups, you just have to worry about delivering a retirement solution to that individual.”