Colonial First State (CFS) today announced that annuities will be available through its FirstWrap and FirstChoice platforms mid next year. It is intended that the annuity products accessible via these platforms will be provided by Challenger and CommInsure, who together account for more than 70 per cent* of the Australian annuity market.
Financial advisers will now be able to more conveniently and efficiently combine CFS’s account-based pension with an annuity product, providing a more comprehensive retirement solution for clients. Importantly, the features, benefits and rates of annuity products accessible via the FirstWrap and FirstChoice platforms will be the same as those for stand-alone annuity products.
CFS Executive General Manager, Linda Elkins, said annuities have particular advantages for retirees with potential to play a greater role in their investment portfolios.
“An increasingly popular approach to portfolio construction has become part-annuitisation or ‘income layering’, which is about providing a specific level of longer-term income from a number of complimentary retirement products,” Ms Elkins said.
Recent Investment Trends research** points to an increasing adviser demand, with almost 40 per cent of advisers saying they intend to use some type of annuity in the next 12 months.
“We recognise advisers are considering increasing their use of annuities on behalf of their clients, and our platforms can make the process of managing clients’ retirement savings in the one place a much better experience,” Ms Elkins said.
“We conducted extensive market research as well as in-depth qualitative research with a wide range of financial advisers from across the country, which confirmed advisers are looking for more efficient ways to deliver advice to their clients, particularly in retirement.
“CFS has a history of delivering quality for advisers and their clients. We aim to provide advisers and their clients with quality investment solutions, simple products and reliable service. Bringing annuities on platform will reduce the amount of paperwork required and provide a more complete solution on platform for advisers and their clients,” Ms Elkins said.
Two key drivers, in addition to adviser demand, were behind this decision by CFS:
- A growing retirement focus from both the industry and the government
Several factors are behind this increasing focus: the baby boomer demographic is hitting retirement age and there is a growing population of retirees. In addition, there is pressure on the sustainability of the aged pension and longevity risk is a major challenge for retirees.
- A growing acceptance that an allocation to annuities can be part of an optimal retirement strategy for a large segment of customers
The GFC acted as a wake-up call to sequencing and market risks, which are elevated risks for both pre-retirees and retirees. Combining the flexibility of account-based pensions with an allocation to an annuity can be a good strategy for many investors. CFS modelling, global trends and academic research suggest that annuities will be an increasingly important part of the retirement solution.
“We understand that quality financial advice, delivered efficiently and supported by a tool kit of solutions, enables advisers to tailor the optimal solution for each of their clients’ specific needs,” Ms Elkins said.
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*Plan For Life Quarterly Data System June 2014
**Investment Trends Retirement Planner Report 2013
About Colonial First State
Colonial First State (which includes Colonial First State Investments Limited (ABN 98 002 348 352) (CFSIL) and Avanteos Investments Limited ABN 20 096 259 979 (Avanteos) (trading as Custom Solutions)) provides investment, superannuation and retirement products to individuals and corporate and superannuation fund investors, as well as being the operator and administrator of investment platforms (the CSF Platforms).
CFSIL and Avanteos are owned ultimately by Commonwealth Bank of Australia ABN 48 123 123 124. The Commonwealth Bank of Australia and its subsidiaries do not guarantee performance or the repayment of capital of Colonial First State (including CFSIL and Avanteos).
Any annuity products accessible via the CFS Platforms will be issued by the relevant annuity provider (for example Challenger Life Company Limited ABN 44 072 486 938, Challenger Retirement and Investment Services Limited ABN 80 115 534 453, and The Colonial Mutual Life Assurance Society ABN 12 004 021 809 (trading as CommInsure)), and are not issued by CFSIL or Avanteos.
The above information is general advice only. It does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement available from the product issuer carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision.