Partial annuitisation retirement income portfolio guidelines

Aim: To examine the role annuities can play in developing a sustainable and flexible retirement income stream.

Outcome: At the end of this module advisers will understand:

  • How to assess the needs and risks of retirees;
  • The case for including annuities;
  • Annuities as an asset class;
  • How to integrate annuities in a retiree’s portfolio;
  • Managing a portfolio that includes annuities; and
  • Mercer retirement income portfolio guidelines.

Abstract: The Mercer research explains the role and benefits annuities can provide in developing sustainable and flexible retirement portfolios. Lump sum superannuation benefits provide considerable flexibility and freedom, but also create greater financial risk and responsibility for the retiree. However, the use of annuities in a portfolio can provide a retiree with a level of protection against longevity and investment market risk. What are annuities, what needs they meet and risks they mitigate, and how they can be integrated into an investment portfolio are described.

Although the article is set in the Australian context, the principles also apply in New Zealand.