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Retirement planning isn’t a set and forget exercise. The needs of retirees change as they progress further into their retirement years, writes George Lytas head of annuities at CommInsure.
While all retirees are different, most have similar priorities. They want a regular, reliable income stream that will fund their lifestyle, protect against running out of money – and the ability to leave an inheritance if they die earlier. The order of those priorities will change depending on their personal circumstances, age and stage in life.
The difficulty with retirement planning is that no one knows exactly how long they’ll live and exactly how much money they’ll need.
Advisers have the challenge of designing and implementing strategies that successfully balance an individual’s desire for income, longevity protection and the ability to leave an inheritance.
Research shows that combinations of an account-based pension and a lifetime or deferred life annuity can often provide superior outcomes to an account-based pension alone^.
Another potential retirement income solution includes insurance bonds, which may be an alternative for investors seeking a tax-efficient way to invest outside superannuation.
Interest in insurance bonds has steadily grown for a variety of reasons including demand for flexible investment options that allow investors to access their savings, and with proposed changes to superannuation, investors are actively looking at non-super investment solutions.
Account-based pensions, lifetime annuities and insurance bonds each have their own place. They play a valuable role in helping advisers balance and manage a client’s priorities while maximising their retirement income.
^ The Optimal Solution to the Retirement Riddle paper by Colonial First State, a related party of CommInsure, and Ernst & Young, May 2015
This information was prepared by CommInsure, a registered business name of The Colonial Mutual Life Assurance Society Limited ABN 12 004 021 809 AFSL 235035 (CMLA) a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945.
Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.
CommInsure is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.
