Hostplus considers adding deferred annuities

Hostplus is looking at adding deferred annuities to its suite of retirement income products over the next 12 months, according to Hostplus group executive, member experience, Paul Watson.

"We've actually landed on deferred annuities as probably the most appropriate, guaranteed-style product to be the next thing for us to look at and potentially introduce to our platform," Watson told Industry Moves.

Hostplus already offers members an account-based pension and last year introduced its CPIplus account-based pension investment option which provides some protection against potential increases in inflation.

Watson says that the reason they're considering a deferred lifetime style annuity, as opposed to immediate annuities or term annuities, is that a combination of their existing account-based pensions, appropriate advice, the aged pension for those who are eligible, and an annuity which kicks in around typical life expectancies in the 80s, should give retirees the confidence that they will have an income for life.

"The important thing about adding [a deferred annuity] to our mix in the not-too-distant future is it then allows you to come right back to today and be able to show a retiree or a prospective retiree [how] they can have a good and reliable source of income over that journey," Watson says.

"And what that allows them to do is to make more competent decisions in the early part of the time, about what they can draw down. In our research and assessment, many, many more members, and I think Australians more generally, can probably have a higher standard of living in retirement by drawing more of their income than they are at the moment."

Like all superannuation funds, Hostplus has been considering its retirement income strategy for members over the past 12 months as part of the new Retirement Income Covenant which was introduced on 1 July 2022.

Their Retirement Income Strategy is available on their website and has considered the needs and requirements of its member cohort. In putting that together the fund considered how existing products served the needs of members in retirement and what products could augment those needs.

Watson said it would make a determination on deferred annuities over the course of this financial year.

"I think what the retirement income covenant has done, and one of the great utilities of this is I think we'll see over the next couple of years particularly, a lot of innovation in the sector," Watson says.

[We'll see] a lot of accelerated development around things like predictive models and the things that actuaries are very good at designing in terms of predictions around outcomes in the future, and bringing that to real retail sort of level. Retirement income projection tools, things like that that, will be a lot more accurate than they have been in the past."