The verdict on RetireSmart from Australian Catholic Superannuation
The trouble with some income pensions, known as account-based pensions, is that they are invested so conservatively that retirees receive an extremely low income.
RetireSmart, a new product from Australian Catholic Superannuation, tackles this by providing two investment "buckets": one for cash and the other for growth assets. The shares and property in the growth bucket produce dividends, interest and capital gains and generate a consistent income stream.
RetireSmart is designed to help address the risk of outliving your money. It invests the member's account balance into two years of cash for secure short-term income.
The income from the growth investments is put back into the cash bucket to fund regular pension payments.
If the balance in the cash bucket rises above three years' worth of pension payments, the excess cash will be transferred to the growth bucket.
This redistribution happens automatically and members do not need to actively manage the allocation of their assets. RetireSmart can also be used for transition-to-retirement (TTR) pensions.
Members have flexibility in selecting their annual income subject to an age-based minimum. The maximum is 20% of the account balance (10% for TTRs). Members can also choose their payment frequency: weekly, fortnightly, monthly, quarterly, half yearly or yearly. They can make lump sum withdrawals on top of the regular payments. The minimum initial investment is $100,000.
This is a straightforward product that has taken a smart approach to prolonging capital because outliving their savings is a big risk for many retirees.
What is missing is a growth option focused specifically on high-income investments. There is no upfront cost and the investment fee for growth is 0.63% and for cash 0.09%.
The admin fee is $1.50 a week plus 0.25% of the account balance. The fund takes care of payments and investments but offers flexibility so you can enjoy your retirement.