In an industry-first for platforms, CommInsure the life insurance business of the Commonwealth Bank, today launched a range of annuities via Colonial First State’s award-winning FirstChoice and FirstWrap platforms.
Greg Ballard, General Manager Superannuation & Investments, CommInsure said it was an important milestone for the annuities industry as financial advisers, for the first time, have access to annuities via retail platforms and will have greater access to retirement income solutions.
“We’re delighted to announce that CommInsure annuities are now available for investment via FirstChoice and FirstWrap platforms. Advisers and their clients will now be able to access the strength and trusted brand of CommInsure annuities from one integrated front end.
“Importantly, financial advisers can more efficiently combine Colonial First State’s account-based pension with a CommInsure annuity and to address market, sequencing and longevity risks,” Mr Ballard said.
According to Investment Trends Retirement Income Report1, 44 per cent of pre-retirees aged 40 and over expect to outlive their retirement savings. Among those who would consider investing their money in annuities, 66 per cent cited barriers to doing so. The most commonly cited barriers are not knowing enough about them (28 per cent), too complex (16 per cent) and lack of adviser recommendation (16 per cent).
George Lytas, Head of Annuities, CommInsure said, “Making annuities more accessible is an important part of our strategy. By offering our annuities on Colonial First State’s platforms we can more easily reach a wider target market, particularly advisers who are at the forefront of providing retirement advice and are essential to driving greater awareness and take up of annuities.”
Optimising income in retirement
According to Lytas, “While the optimal solution will differ for each client, research shows that a ‘layered approach’ or combining the age pension with an account based pension and a lifetime annuity can provide superior outcomes for Australians in retirement. We know that half of all people will live beyond their life expectancy so planning for living longer is important,” he said.
“A combination of a CPI-indexed lifetime annuity with the age pension can be used to help meet the customer’s basic living expenses. The remainder can be invested in an account based pension to meet the customer’s desired income until the account balance is depleted over time. This combination can offer a better outcome from a total income perspective over the life of a retiree,” Mr Lytas said.
Recent research from Ernst & Young and Colonial First State found a 67 year old single male with $400,000 in super and seeking to live on $43,0002 per annum could be up to $20,000 better off over their retirement if they invested 25 per cent in a CommInsure lifetime annuity and lived five years beyond their life expectancy3. If the same male invested 50 per cent in a CommInsure lifetime annuity he would be around $50,000 better off if he lived five years beyond life expectancy.
A 67 year old couple with $500,000 in super and seeking to live on $58,0004 per annum could be up to $60,000 better off over their retirement if they invested 25 per cent in a CommInsure lifetime annuity and lived five years beyond their life expectancy. If the same couple invested 50 per cent in a CommInsure lifetime annuity they would be up to $120,000 better off if they lived five years beyond life expectancy.
CommInsure recently announced enhancements to its annuities offering, providing more competitive rates across its full range of annuities including short term, long term and lifetime income annuities and reducing the minimum investment amount for CommInsure annuities to $10,000 (from $20,000).
“The features, benefits and rates of our annuity products accessible via the FirstWrap and FirstChoice platforms will be the same as investing in stand-alone CommInsure annuity products,” Mr Lytas said.
1 “Investment Trends, Retirement Income Report, November 2014”
2 This level of income is approximately equal to the ASFA comfortable income level for individuals. This represents the annual income needed by Australians to fund a comfortable standard of living in retirement, as estimated by ASFA.
3 Source: Colonial First State and CommInsure analysis with Ernst & Young assumes single male life expectancy of 89 and heterosexual couple life expectancy of 92; assumes 80/20 growth/defensive asset allocation for the non-annuitised component of the portfolio and a 60/40 asset allocation overall including the annuity; assumes expected levels/asset returns (p.a.) of CPI 2.5%, Average Weekly Earnings 3.5%, Cash rate 4.2%, Fixed income 5.1%, Australian equity 7.8%, Listed property 7.8% and International equity 8.2%; assumes account based pension ongoing fee of 1.0%pa; assumes Age Pension rules as at 19 June 2015.