The Ralph Stewart-founded Lifetime Retirement group has launched a new fund that offers retirees regular income but without the previous insured component.
Lifetime closed its ‘variable annuity’ fund, launched in 2015, to new investment on Christmas day last year with about $137 million under management. Existing investors will be offered the option of transitioning to the new fund this week or cashing out.
Under the revised strategy, the new ‘Retirement Income Fund’ (RIF) invests in the same mix of funds as the now-closed ‘Lifetime Income Fund’, minus the guaranteed minimum included in the latter product.
Instead, the just-launched Lifetime fund coverts investor capital and investment returns into regular fortnightly or monthly payments based on an ‘annuity factor’ calculated by the firm.
According to the RIF product disclosure statement: “The Your Annual Retirement Income is not guaranteed, it is Lifetime’s estimate of the level of your Annual Retirement Income for you based on the amount you wish to invest.”
Following the strategic shift, the Simplicity KiwiSaver scheme also closed the Lifetime ‘Guaranteed Income Fund’. Simplicity added the Lifetime option to its KiwiSaver late in 2017, raising over $13 million by December last year.
Previously head of Axa NZ and the Accident Compensation Corporation, Stewart launched the country’s first ‘variable annuity’ product in 2015 after a long battle laying the insurance groundwork with the Reserve Bank of NZ (RBNZ). While the concept garnered enthusiastic support from a range of financial advisers and high-profile backers, the guaranteed component of the Lifetime offer became difficult to maintain as interest rates sank close to zero and RBNZ pressure to almost double the insurance capital ratio amid COVID-19 uncertainty last year.
Stewart said Lifetime had explored a number of options to retain the insurance guarantee, working with regulators and other pension providers.
Ultimately, however, he said the best solution was to create the new fund, minus the guarantee.
“We built the new fund, which is effectively an allocated pension,” Stewart said. “It’s half the price [of the previous guaranteed fund] and could offer 90 per cent of the income certainty.”
The new RIF invests in a mix of Vanguard index funds, an ‘enhanced cash’ Harbour Asset Management product and an ANZ on-call account. As per the original Lifetime fund, global consultancy firm, Milliman, provides a currency hedge overlay and risk management strategy. Lifetime has set an estimated annual management cost for the new fund at 1.35 per cent.
Public Trust is supervisor and custodian while MMC handles administration for the Lifetime fund.
