Accurium has engaged with an investment-linked lifetime income product provider to map out how retirees could use one of its solutions in their retirement strategy to boost income and reduce concerns around longevity risk.
The SMSF actuarial certificate provider undertook independent research on the LifeIncome product issued by Generation Life and analysed 672 retirement strategies and 96 household cohorts across 2000 simulations.
In doing so, Accurium found retirees with moderate to high asset values and conservative to growth risk profiles saw an uplift when LifeIncome was included in their portfolios and many cohorts reported more than a 10 per cent increase in confidence in their retirement strategy.
Accurium principal Melanie Dunn said its modelling showed advised retiree clients with total assets above the age pension assets test limit and a conservative to growth risk profile may find considerable benefit from adopting the product alongside other income sources, such as an account-based pension and the age pension.
“These clients, often wealthier and more educated, may be expected to live longer than the national average,” Dunn said on the firm’s website.
“To account for this longevity risk, the report tested outcomes to the ‘25 per cent age’, the age beyond which 25 per cent of Australians are expected to live. This benchmark is proposed as a minimum planning horizon for healthy advised clients.
“The [Accurium] report calculated a retirement strategy score: the proportion of scenarios in which a household’s target income was sustainable to the 25 per cent age.
“The results were compelling. Retirees with moderate to high assets and a conservative to growth risk profile saw significant improvements in their strategy scores when LifeIncome was included. In some cases, the uplift exceeded 40 per cent, underscoring the product’s potential to enhance retirement confidence.
“The report also highlights how LifeIncome can increase age pension entitlements, particularly in the early years of retirement. For example, a couple with $800,000 in assets could see their first-year age pension rise by up to 68 per cent with LifeIncome in their portfolio.
“By modelling real-life scenarios, we aimed to provide advisers with a practical framework to help clients balance flexibility, sustainability and confidence in retirement.”
Generation Life retirement solutions general manager Patrick Clarke said the findings were important given the concerns retirees have around longevity risk and showed how the inclusion of an investment-linked lifetime income product could provide long-term income that grows with investment performance alongside the age pension.
