Old Mutual Corporate is preparing to launch a brand-new retirement income solution for SuperFund members as part of the Old Mutual SuperFund’s Annuity Strategy, the Old Mutual SuperFund Living Annuity. This is an in-fund living annuity that is designed to provide retirees with a flexible income option at competitive fees.

Until now, the Old Mutual SuperFund Annuity Strategy provided members with two out-of-fund annuity options: the Old Mutual Fund Select Annuity, a traditional with-profit annuity, and the Old Mutual Max Income Living Annuity for SuperFund, an adjusted retail living annuity.

While these options have certain advantages, the introduction of the Old Mutual SuperFund Living Annuity will be a fresh alternative, built to improve member outcomes as it relates to the use of a living annuity to provide a sustainable retirement income by way of age-related drawdown ranges and competitive fees. In addition, intermediaries can advise members based on their individual circumstances.

Meeting the needs of retirement fund members

The Fund Select Annuity offers institutional pricing and higher starting pensions compared to similar retail products, and benefits retirees through the lower costs associated with group mortality rates.

However, the Old Mutual Max Income Living Annuity for SuperFund, though discounted compared to retail options, still incurs higher fees than institutional rates, leading to increased costs for members with retirement savings over R1 million who continued within the same investment fund post-retirement.

Additionally, the Old Mutual Max Income Living Annuity for SuperFund allows for relatively high drawdown rates of up to the prescribed maximum of 17.5%, and this could pose sustainability risks for retirees when it comes to making their living annuities last longer.

The new Old Mutual SuperFund Living Annuity is designed to improve on these solutions by maintaining the benefits of institutional pricing while offering a more sustainable and structured approach to income drawdown, and administrative and investment management fees. It also allows for intermediaries to support members and be remunerated for their services.

A new opportunity for intermediaries

The Old Mutual SuperFund Living Annuity allows intermediaries to provide advice to their member clients. Unlike the Old Mutual Max Income Living Annuity for SuperFund, which limits commission earnings for intermediaries, the Old Mutual SuperFund Living Annuity is structured to include Initial and Ongoing Advice Fees to be paid.

This means intermediaries can continue to support SuperFund members through retirement, offering financial guidance and ensuring they have access to sustainable retirement income.

This added value not only enhances the advisory role but also builds a stronger connection between intermediaries and clients as they navigate retirement planning.

Key features of the Old Mutual SuperFund Living Annuity

Sustainable income drawdown limits

The Old Mutual SuperFund Living Annuity offers a structured approach to income drawdown rates, with limits that vary based on the age of the retiree. While the minimum drawdown remains at 2.5%, the maximum has been restricted to rates that align with sustainable, age-related retirement income strategies, decreasing the risk of your client’s retirement savings being depleted.

For instance, a 55-year-old retiree’s maximum drawdown is now set at 6.5%. This approach also aligns with draft regulatory standards, helping to ensure that members can maintain an income over the long term.

Institutional investment fees

A significant advantage of the Old Mutual SuperFund Living Annuity is the institutional pricing of investment fees. Members have access to five Regulation 28-compliant investment portfolios, each priced at institutional rates. Options include Old Mutual’s Absolute Stable Growth and Absolute Smooth Growth portfolios, which provide a smoothed approach to managing market volatility.

These portfolios help mitigate sequence risk, allowing for a more aggressive underlying investment strategy with lower risk exposure. By remaining in the same investments post-retirement, members can avoid the market timing risks associated with transitioning to new portfolios.

Competitive and transparent admin fees

The administrative and governance fee for the Old Mutual SuperFund Living Annuity is currently set at a flat rate of R250 (VAT inclusive) per month, which is highly competitive within its market. This structure simplifies cost management and ensures that members with larger account balances benefit from a more cost-effective solution than the percentage-based fees seen in other offerings.

For comparison, a balance of R1.1 million in the Old Mutual Max Income Living Annuity for SuperFund also incurs R250 monthly, making this new fee structure particularly beneficial for members with higher savings.

Adviser fee accessibility

With the Old Mutual SuperFund Living Annuity, intermediaries have the opportunity to earn remuneration for the advice they provide to retiring members, thereby supporting access to advice for members of SuperFund. Members have access to Retirement Benefits Counsellors (RBCs) for any information they need relating to the Fund’s Annuity Strategy.

RBCs, while not permitted to offer financial advice, provide valuable information, helping members understand their retirement options as well as assisting members in submitting their claims. This advisory model helps members make informed choices.

Simplified in-fund administration

Because this is an in-fund living annuity, it streamlines administration by allowing members to stay within the SuperFund framework, eliminating the need for complex transfers and additional paperwork. Unlike out-of-fund options, which require members to switch to different entities, the in-fund annuity reduces administrative overhead costs and eases the transition from pre- to post-retirement.

Controlled investment choices for better outcomes

The Old Mutual SuperFund Living Annuity offers a curated selection of investment portfolios, managed by the fund’s trustees. This approach limits choice overload, a potential source of confusion for retirees, while providing a diversified range that supports retirement income sustainability. This setup balances flexibility and simplicity, ensuring members can make confident investment decisions, thereby limiting the risks associated with overly broad options.

In summary, this is what the Old Mutual SuperFund Living Annuity will provide:

• Age-based drawdown limits: Sustainable income drawdown rates tailored to a member’s age.
• Institutional investment fees: Access to five Regulation 28-compliant portfolios at institutional pricing.
• Competitive admin/governance fees: A flat R250 monthly fee, offering savings, particularly for members with larger balances.
• Adviser fee inclusion: Support for advisory fees, allowing intermediaries to provide tailored retirement planning to members.
• Simplified in-fund administration: Reduced administrative complexity by allowing members to stay within Old Mutual SuperFund.
• Curated investment portfolios: Limited, trustee-managed investment choices to prevent choice overload.

With the Old Mutual SuperFund Living Annuity, Old Mutual SuperFund will expand its retirement solutions for both members and intermediaries, ensuring that retirees have access to sustainable income options while intermediaries can build stronger client relationships.