What you need to know about the new type of retirement account that is delivering Australians a flexible lifetime income that never runs out.
For the past thirty years the retirement landscape has been dominated by lifetime annuities and account-based pensions (ABPs).
But there’s a new player in town.
Forward-thinking advisers are rapidly adopting innovative retirement income streams (IRIS) – a new type of retirement solution that can offer more flexibility, more certainty and better outcomes.
A brief history of retirement income
Over the past three decades, most super law changes have focused on the accumulation phase. In the absence of any major policy developments in the retirement phase, advisers have been left to rely on ABPs and annuities to deliver income to their clients.
ABPs offer great flexibility in terms of investment options, the ability to drawdown income and capital, and tax-free earnings and income. But they don’t provide the certainty of an income for life, so most clients only draw the annual age-based minimum from their ABP due to the fear of running out (FORO).
Annuities can provide the certainty of a lifetime income. But they don’t deliver the flexibility to adjust income or control investments.
So a few years ago, regulators recognised the need for more innovation in the pension phase to give Australians the confidence to draw on their super savings in retirement.
New innovative retirement income streams (IRIS)
"These new rules remove taxation barriers to the development of new products that will provide greater flexibility in the design of income stream products to give more choice to consumers, while ensuring income is provided throughout retirement" - Minister O’Dwyer.
Concessional assets test discounts
Retirement income streams are assessed differently by Centrelink and can be used to access or increase the amount of Centrelink payments a client is entitled to.
Retirement Income Covenant
Passed through Parliament and requires super Trustees to develop a retirement income strategy for their members, improving the financial outcomes for Australian retirees.
Products start to land
Competition heats up, fuelled by recent legislation changes.
The result was a new category of retirement solutions called innovative retirement income streams, which are actually a super-based solution regulated under the Superannuation Industry (Supervision) Act 1993.
The Government developed IRIS to deliver:
- the certainty of a higher income1 for life
- the comfort that retirees would never run out of income
- the confidence to spend more of their superannuation savings
- more flexibility than traditional lifetime income products.
1Compared to typical account based pension income rates.
5 common benefits of IRIS
- Deliver a market-linked income stream that pays income for life – delivering greater comfort and confidence for retirees.
- Optimise Age Pension entitlements with assets and income test discounts.
- Some allow access to a full platform of investment options, allowing advisers to tailor client portfolios in line with their investment philosophy and risk profiles.
- Some top up retiree accounts with an insured annual bonus.
- Develop new strategies by using deferral options and drawdown flexibility, adjusting annual income.
Note: in exchange for these benefits, full capital access is restricted under the Superannuation laws.
IRIS v ABP
| Account-based pensions | IRIS accounts | |
| Income for life | No guarantee of income for life | Yes |
| Minimum/maximum income | Minimum income, no maximum |
Maximum income, no minimum |
| Age Pension assets test | 100% assessable | 60% of purchase amount assessable until threshold day (age 84)2, then 30% |
| Age Pension income test | Deemed income assessable | 60% of income assessable |
IRIS v annuities
| Annuities | IRIS | |
| Investment options | Fixed interest only |
Some offer full range |
| Flexibility | Fixed rate of return |
Choose and review investments |
| Annual income | Set payment rate |
Some can be adjusted to suit client needs |
| Age Pension assets test | Discount available |
60% of purchase amount assessable until threshold day (age 84)2, then 30% |
2 Defined by the Department of Social Services, threshold day is the life expectancy of a 65 year old male, which is 84 years of age as at July 2024.
Compelling Centrelink incentives
IRIS offer unique social security benefits.
Only 60% of the purchase amount is assessed for the assets test. After threshold day, that drops to just 30%.
Age Pension entitlements can be increased by deferring income or opening an IRIS account pre-retirement.
Only 60% of IRIS income counts towards the income test.
So retirees with assets up to double the Centrelink upper thresholds may still access some Age Pension and the Pensioner Concession Card – assuming they split their savings around 50:50 between an ABP and an IRIS.
IRIS + ABP – best of both worlds
Savvy advisers are using IRIS accounts alongside ABPs to give their clients access to capital, higher Age Pension and a higher retirement income that never runs out – while retaining control of investments.
MyNorth Lifetime – IRIS in action
MyNorth Lifetime is a suite of three award-winning* IRIS accounts that put financial advisers at the forefront of retirement advice by enabling innovative strategies that deliver the comfort and confidence of a higher income for life.
You can use MyNorth Lifetime throughout accumulation and into retirement, while maintaining control of all important portfolio decisions. With the freedom to invest from North’s extensive super and pension menu, MyNorth Lifetime promotes long-term client engagement so you can continue to support their retirement needs.
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Important information
The information on this page has been provided by NMMT Limited ABN 42 058 835 573, AFSL 234653 (NMMT). It contains general advice only, does not take account of your client’s personal objectives, financial situation or needs, and a client should consider whether this information is appropriate for them before making any decisions. It’s important your client consider their circumstances and read the relevant product disclosure statement (PDS), investor directed portfolio guide (IDPS Guide) and target market determination (TMD), available from northonline.com.au or by contacting the North Service Centre on 1800 667 841, before deciding what’s right for them.
MyNorth Investment and North Investment are operated by NMMT. MyNorth Investment Guarantee is issued by National Mutual Funds Management Limited ABN 32 006 787 720, AFSL 234652 (NMFM). MyNorth Super and Pension (including MyNorth Lifetime), MyNorth Super and Pension Guarantee and North Super and Pension are issued by N.M. Superannuation Proprietary Limited (ABN 31 008 428 322, AFSL 234654 (NM Super) as trustee of the Wealth Personal Superannuation and Pension Fund (the Fund) ABN 92 381 911 598. NMMT issues the interests in and is the responsible entity for MyNorth Managed Portfolios. All managed portfolios may not be available across all products on the North platform. All of the products above are referred to collectively as MyNorth Products. The information on this page is provided only for the use of advisers, it is not intended for clients. This page provides a brief overview of some of the benefits of investing in MyNorth Products. The adviser remains responsible for any advice/services they provide to clients including making their own inquiries and ensuring that the advice/services are appropriate and in accordance with all legal requirements.
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*Deferred Lifetime Investment Linked Winner, Innovation Winner, Plan for Life Excellence Awards, 2022, Pension Fund Design and Reform Award winner at World Pension Summit 2023, Chant West Best Fund: Innovation Winner 2023, Chant West Best Fund: Lifetime Product Winner 2024.
Zenith CW Pty Ltd ABN 20 639 121 403 AFSL 226872/AFS Rep No. 1280401 Chant West Awards issued 22 May 2024 are solely statements of opinion and not a recommendation in relation to making any investment decisions. Awards are current for 12 months and subject to change at any time. Awards for previous years are for historical purposes only. Full details on Chant West Awards at https://www.chantwest.com.au/fund-awards/about-the-awards.