Game changer for Australia’s retirement income market

  • 30 October 2014
  • Australia, Melbourne
  • 1 in 4 Australians will outlive their retirement savings by more than 10 years

  • 54% of Australians expect to have less money than they need for the lifestyle they desire in retirement

  • Mercer LifetimePlus™, a world-first pooled mortality investment fund, will now protect more Australians against the risk of outliving their savings

Mercer has introduced a game-changing solution to Australia’s retirement income market; a new investment option designed to protect Australians against longevity risk, the risk of outliving their savings.

According to Mercer’s latest research, 54% of Australians expect to have less money than they need for the lifestyle they desire in retirement.  On average, people expect to have half the amount they need to retire comfortably, falling short by almost $500k.

The Financial System Inquiry (FSI) interim report, in July this year, called the lack of effective longevity risk management a major weakness of Australia’s retirement income system.

Mercer’s Managing Director and Pacific Market Leader, David Anderson, said, “Australia is facing a very real economic and social dilemma due to a lack of protection against longevity risk up until now.”

“Longevity risk is a huge threat to Australians’ quality of life and healthcare in retirement, but until now we’ve had very few cost effective options to ensure our super lasts for as long as we do, which has put pressure on the public purse and our own hip pockets” said Mr Anderson.

Mercer’s longevity solution is called Mercer LifetimePlus™.  It is an investment option added to an account based pension within a customer’s superannuation account.  Mr Anderson said Mercer’s LifetimePlus was a game-changer and would prove a great boon to customers by removing uncertainty in their later years.

The features of Mercer’s longevity solution include:

  • An income for life from an account based pension with no insurance premiums

  • It is a world-first mortality pooling fund

  • Requires around half the amount of capital as an annuity to secure a similar annual income

  • Allows customers to access up to 95% of capital up to the age of 75 years

  • Members’ investment risk profile remains constant

  • A mutual pool with no profits paid to shareholders of a life company

  • Customers funds remain in their superannuation account

  • Delivers quarterly investment returns, capital returns after 15 years, and a living bonus from the day you invest.


It’s anticipated retirees would invest around 25% of their super retirement benefit into Mercer LifetimePlus: a customer who invests $100,000 from a $400,000 super balance could expect up to $10,000 pa above the age pension after their super runs out.

Mercer’s research shows Australian retirees are likely to outlive their savings by more than five years on average and one in four will outlive their savings by 11 years.  As many as 10% of the population will live even longer and may be forced to rely solely on the age pension for 15 years or more.

“Retirement will be a financial challenge for a lot of people.  Life might be simple but comfortable for the first decade or so, but once savings run out the Age Pension will only provide about half the amount required for a comfortable lifestyle, what happens when medical expenses increase or aged care is required?” Mr Anderson said.

“Removing a degree of uncertainty for people planning for retirement, which is exactly what Mercer LifetimePlus can do, will make life much easier now and in the future.

“We know 94% of retired Australians believe their super should provide an income for the rest of their life.  With Mercer LifetimePlus you can keep your money in your super fund’s account based pension, avoid changing your investment risk profile, and ensure an income until the day you die,” he said.

Speaking at the launch of Mercer LifetimePlus, Media Super CEO, Graeme Russell, said he was pleased to have a simple, affordable solution for members’ retirement savings to provide an income for the rest of their lives.

“The Mercer solution is better value for money than other solutions, and members’ funds would stay in their superannuation pension account under their control.  As it’s based on a mutual pool, the product aligns closely with the values of funds like Media Super that are run only to benefit members”, he said.

CEO of VicSuper Michael Dundon also spoke at the launch and said, “It’s great to see such innovative product development happening in our industry in the retirement income space.  To ensure our members can maintain their desired lifestyle in retirement, we believe we must provide appropriate solutions which manage the risks they face, as well as providing for their income needs. An adviser led, income layering approach to building a member’s retirement portfolio can provide the best outcome for our members. Using an innovative product suite is fundamental to this approach.”

Australia has a world-class retirement savings system, but retirement income solutions have been the Achilles heel of our system for too long.

Senior Partner and Senior Actuary at Mercer, Dr David Knox said, “It’s time to leverage the scale of the superannuation industry to provide longevity risk pooling, the sharing of risk will lead to improved outcomes for everyone.

“Longevity risk is a problem in Australia that demands urgent action. We believe we’ve changed the game for the better with our new longevity solution.

“Providing protection by pooling the risk makes sense, it is fair.  The longer you live the more money you will receive.  In addition, as it is part of an account-based pension you can also access your capital.

“The proverbial certainties in life are of course death and taxes, the uncertainties are when and how much.  Our longevity solution helps protect against the uncertainties relating to how long you will live.  It’s more accessible, more affordable, and more innovative than anything currently available,” Dr Knox said.

Learn more about Mercer's longevity solution here


About Mercer

Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @MercerAU @MercerInsights

About the research:

The research findings are based on an online survey of more than 1,500 Australians who were the sole or joint household finance decision makers, aged 50-80 years, and not receiving a full aged pension.  It was conducted for Mercer in July 2014 by market research company Nature.