AMP launches income-boosting product to shake up retirement market

AMP’s latest product combines elements of an account-based pension and an annuity, giving retirees more flexibility on their savings and a higher income for life.

AMP is looking to shake up the retirement income market with a new product that combines ­elements of an account-based pension and an annuity, in a move the wealth manager says will give retirees more flexibility on their savings alongside the certainty of a higher income for life.

The wealth manager’s new MyNorth Lifetime product, available through the North Wrap platform, stripped away the limitations of annuities and traditional pension accounts, AMP’s general manager for retirement solutions Ben Hillier said.

“An account-based pension has a lot of flexibility for retirees and advisers to invest how they like, there’s a lot of flexibility. But people don’t know how much to draw down without fear of running out,” Mr Hillier told The Australian.

“On the other hand, you have an annuity, which provides a guaranteed income for life, but there’s no flexibility. You can’t adjust to the changing circumstances and the rates of income have traditionally been quite light.”

AMP has combined both features into its lifetime income suite, allowing for flexibility and transparency of investment choice, including managed funds, shares, deposits and cash etc, as well as the assurance of a guaranteed income. The product had the highest amounts of retirement income available for retirees in the market, Mr Hillier said.

This is due to the investment choices on offer, as well as strategies to increase eligibility for the age pension. Savers can also choose how much of their nest eggs go into the income, versus the traditional super account.

“The different options also allow advisers and their customers to begin planning for retirement earlier, draw higher rates of retirement income and take advantage of superior tax and Centrelink strategies,” Mr Hillier said.

“Unlike alternative lifetime income products, this isn’t a set-and-forget solution that can’t be adjusted during a retirement, that will often last decades.”

For savers using the Lifetime products, the rates of income available to retirees increase over time and are calculated as a percentage of the overall account balance. A 60-year-old single person can get an annual income of 7.1 per cent, with this rising to 7.2 per cent the following year, and so on. This was substantially higher than anything else available in terms of a lifetime income solution, Mr Hillier said.

Research released by AMP earlier this month revealed that millions of Australians were worried they won’t have enough savings for retirement, with three in five workers expecting a shortfall in their later years, up from two in five in 2020.

While most expect to retire with about $400,000 in their nest eggs, they see $600,000 as the amount needed to live out their final years, AMP found.

Meanwhile, Treasury’s 2020 retirement income review found chronic underspending in retirement due to retirees’ fears of ­running out of savings.

The industry needed to do better to help Australians take full advantage of their hard-earned retirement savings, AMP chief executive Alexis George said.

“The MyNorth Lifetime Income account addresses this critical issue and is a game-changer for retirees and advisers,” Ms George said. “Developed by our team of retirement experts, it’s a first of its kind solution, which provides higher rates of income, for life. This gives greater peace of mind in retirement and the confidence to spend savings and live life to the full.”

Originally published as AMP launches income-boosting product to shake up retirement market