Zenith rates Mercer LifetimePlus APPROVED

Mercer LifetimePlus (MLP) is a newly developed product designed to provide participating superannuation funds access to longevity solutions to their members. MLP sits as an investment option within a participating super fund and is designed to be accessible to those members with Account Based Pensions.

MLP represents a new innovation in the search for longevity solutions for retirees. Designed to provide an income for life; MLP is not however, structured with a guarantee from a Life Company. The underlying investment strategy is a global fixed income portfolio utilising a blend of Mercer selected fixed income managers and Australian Deposits from high quality ADIs. To supplement the income stream, MLP utilises a ‘longevity pooling’ concept (the Living Bonus). This Living Bonus is created by levying a cost to members who commute their investment either voluntarily or by death. These bonus payments are shared out on a six monthly basis amongst the remaining members as income. In addition, MLP amortises back the members’ capital after 15 years for those over age 75 to further lift the income stream.

Zenith’s View

Zenith sees the MLP concept as innovative as it removes the traditional issue around the high implicit cost of insurance which is typically associated with investment protection products. Zenith believes MLP will likely appeal to those concerned about the implied cost of protection guarantees. The positive nature of MLP not being reliant on expensive insurance premiums (and not being subject to benefit risk), is somewhat offset by the fact that the concept will rely on necessary growth in the products and scale to generate payments coming from the longevity pool to fund the Living Bonus.

MLP’s use as a longevity protection product will be dependent on individual circumstances regarding life expectancy, minimum income requirements and portfolio balance. It is less likely to be suitable for individuals with poor health, low superannuation balances or reduced life expectancy. On the whole, Zenith sees the MLP as providing a useful option to a retiree’s investment strategy partnering with a strong established product provider. Zenith rates Mercer LifetimePlus APPROVED.