Two new low-risk accounts for retirees

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Australian Defence Credit Union (ADCU) has introduced a product for investors who want to keep their super or pension in low-fee cash or term deposits.

ADCU says it surveyed members and found that those who were about to retire wanted a low-risk investment where their savings were safe and not eroded by fees.

It designed two accounts, Capital Guaranteed Super and Capital Guaranteed Pension, with the following features:

defence

  • No investment, entry, ongoing or exit fees;
  • Capital guaranteed, no risk of negative returns;
  • Choice of fixed or variable rates of return;
  • Tax-free income for members over 60;
  • Covered by the federal government's financial claims scheme.

There are a couple of advantages with these products.

The first is a predictable income that is not going to go backwards. However, if interest rates are low, then inflation can mean your savings are marking time or going backwards after taking inflation into account.

The other main advantage is no fees but this is quite usual with a retirement savings account or a bank-styled superannuation or pension account.

The minimum investment is $30,000 and the balance must not fall below $2000. Australian Defence CU's term deposit rates are up to 3.85% for terms of three months to 24 months. The cash rate is 2.68% on amounts over $10,000.

The verdict

Good cash or term-deposit option for super or pension investment. But with cash rates low, you must be careful that the real return doesn't dip below the inflation rate and your savings go backwards.

Depending on how long you live and how much you have invested, a capital-guaranteed investment on its own may not provide enough money for the rest of your life.

Over the long term, growth investments such as shares have more volatility but potential for better returns.

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.