Russell evolves pension landscape to meet the needs of 'active' retirees
New all-in-one super and pension account allows easy transition from work to retirement - and back to work again... Global pension giant brings 'mini-me' pension plans to individual Australians
SYDNEY, 29 May, 2007 - One of the world's most respected advisors to multi-billion dollar global pension plans - Russell Investment Group - has unveiled a new pension product for individual Australians which will revolutionise the retirement savings landscape in Australia.
Called the Russell Private Active Pension, the new product has been designed in direct response to Australia's new superannuation taxation arrangements, and foreshadows a dramatic shift in Australia's demographic make-up and ageing population work habits. It increases flexibility for those approaching and in retirement by rolling a contribution and pension account into one.
The product also gives individuals direct access to Russell's world-leading multi-manager and single sector funds, which invest with the same fund managers Russell selects for its large global pension fund clients - effectively packaging up a 'mini-me' Russell-advised pension plan for individuals.
Independent research house Chant West this week awarded the new Russell Private Active Pension the highest '5 Apples' rating.
Steve Schubert, Russell's Director of Actuarial Benefits and Consulting, said the new raft of pension products coming onto the market would help thousands of older Australians more easily manage their finances through their semi-retirement and retirement years. He also reinforced the importance of more sophisticated investment strategies for pension products - as people continue to live longer.
"The vast majority of Australia's $1 trillion in superannuation investments is currently held by people who are still working and saving. However Russell's research shows that this will change dramatically over the next thirty years and ultimately more than 40 per cent of all retirement savings will be held by people over age 65," Mr Schubert said.
He said the trend will be driven both by the new rules which allow money to be left in super for longer, and by sweeping demographic change which will see the proportion of the population aged 65 or more grow to a staggering 25 per cent.
"With increasing life expectancy and improved standards of health, Australians will no longer need to - or want to - completely stop working and saving at a fixed age," he said.
Current legislation prohibits people from making further contributions or rollovers into an established pension fund. The key to the new Russell pension product is that it wraps a new 'contribution account' component around the core pension fund - allowing people who go back to work in some capacity to keep contributing new super money (whether employer or personal contributions) into their pension account. Investment earnings and contributions are taxed at normal super rates, and the balance in the contribution account and core pension account can be combined at a later date without transaction costs.
Planners Welcome Simplified Pension Products
Chris Corneil, Managing Director of Retail Investor Services at Russell, believed planners would greatly welcome the long-awaited emergence of new retirement products that simplified the financial transition from work to retirement.
"Finally, it's a superannuation and pension account all in one," Mr Corneil said. "The new product allows members to make contributions and receive payments from a single account, bringing a pension plan more towards a traditional bank account.
"Russell has been working with advisors, individual investors and employers since legislation changes were announced to develop a product 'from the ground up' that truly takes advantage of these changing aspects of retirement. We have been inundated with inquiries from members of Russell's SuperSolution MasterTrust wanting to explore the implications of continuing to work, or of taking a break and then returning to some kind of work in the future."
Corneil said planners and advisors were also reporting rapid change in what their individual clients were wanting.
"We are clearly hearing from planners that whilst the new simple super system is designed to be simple in theory, in reality the concept of a traditional retirement has changed and therefore the situation, and advice needed, is far more complex.
"Through the new Russell Private Active Pension, advisors now have a solution that does not require them to move clients' funds between different products. They can now focus on the more important role of providing valuable overall retirement planning advice.
Mr Corneil said both advisors and investors were also demanding simpler and more competitive fee structures. The new Russell Private Active Pension has no entry fees, no contribution or account keeping fees and no withdrawal fees. Investors only pay an investment management fee and these are at competitive wholesale rates. The Russell Private Active Pension also allows for multiple pension accounts under the one account for maximum flexibility. Investors can transact online and even link individual accounts of different family members to calculate a fee rebate on amounts in excess of $500,000.
The Russell Private Active Pension is the third and final element of the Russell Private Series range - the first range of Russell products in the world to provide direct access to Russell investment funds to individual investors. Russell launched its Private Investment Series (for ordinary investment money) in Australia in 2005, followed by its Russell Private Retirement Series for superannuation money in 2006.
"This new product is an example of Russell's commitment to develop simple, yet intelligent solutions for advisors and investors," Mr Corneil said. "It wasn't long ago that our typical client measured their assets in billions. And while we continue to pioneer strategies for these clients, today our funds offer the trusted Russell approach to investors of every size."
The Russell Private Active Pension will be available from 1 July.
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