Analysis performed by actuarial firm Accurium has confirmed SMSF trustees who are in retirement are more exposed to longevity risk than individuals in the same stage of life who are members of public offer superannuation funds.
The statistic was revealed to attendees of SMSF Professionals Day 2023, co-hosted by selfmanagedsuper and Accurium, in Sydney last week with an acknowledgement the type of super fund involved was probably not the sole factor making people more sensitive to this element of risk in retirement.
“The study actually identified that on average retirees who have an SMSF live around three years longer than the average population life expectancy,” Accurium principal Melanie Dunn noted during her presentation to delegates.
“I’m not so sure having an SMSF itself causes individuals to live longer. It’s more likely due to socioeconomic and other factors like health and wealth that have been shown to be highly correlated to improved life expectancies.”
Dunn pointed out acknowledgement of this fact can be critical when advisers are formulating retirement strategies.
“So when you are thinking about your retiree SMSF clients, they’re probably already above average in terms of how long their cash flows need to last in retirement,” she said.
According to Dunn, the SMSF investment strategy serves as a helpful aid when looking to assess longevity risk.
“We all know SMSFs are required to formulate and regularly review a strategy that gives effect to the investments of the fund and has regard to the whole circumstances of the fund, particularly having a view around the risks of the fund’s investments and the associated returns in light of diversification, liquidity and cash-flow objectives of the members,” she said.
“These are the things we need to show that we’ve thought about in developing an investment strategy that’s appropriate for a retiree and for a retiree those cash-flow objectives are extremely important, that is, making sure we can achieve those into retirement.”
