Planning for your retirement

Here is an investment to ensure you don't run out of money in your later years. Mercer LifetimePlus is a pooled mortality investment fund designed to protect Australians against the risk of outliving their savings, known as longevity risk, and falling back on the age pension. One in four Australians will live beyond the average life expectancy and outlast their super savings by 10 years, according to Mercer. LifetimePlus is an investment option added to an account-based pension within a customer's super account. For example, a retiree could contribute 25% of their super retirement benefit into LifetimePlus: an investment of $100,000 from a $400,000 super balance could return up to $10,000pa above the age pension after super runs out. LifetimePlus pays out an income for life with none of the expensive insurance premiums that are common in some other products that aim to address longevity risk.

It leverages scale by pooling your money with other members' funds to participate in a conservatively invested longevity pool. When members leave the pool, others share in the surplus left by them.Mercer's managing director, David Anderson, estimates that LifetimePlus requires around half the amount of capital as an annuity to secure a similar annual income. It delivers quarterly investment returns, capital returns after 15 years and a living bonus from the day you invest.

MONEY VERDICT

Mercer LifetimePlus provides certainty of income in old age. The longer you live, the better it is. It has flexible features such as returning 95% of the capital if a member dies up to the age of 75 years. Between 75 and 85, some capital is paid back on death but nothing after 85. Members are rewarded for loyalty through the return of capital. The fee is 0.4%. Total fees paid depend on the allocated pension used. The investment fees are comparable.

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