Endowment Bond Exchange has said there are very few products addressing post-retirement needs and has launched its own zero-couple endowment bond to service the gap in the market.
Endowment bonds allow investors to purchase state government or wholesale bank deposits with a standard payout of $10,000 each and can be purchased with a maturity date that ranges from one year through to 30 years.
“Really, there is no bridge between the accumulation phase and the pension phase and after you retire, there is very little product that can be used for you to plan for the lifestyle that you’ve saved for,” Endowment Bonds Exchange chief executive officer Stephen Duchesne said.
“The idea [of endowment bonds] is that you add to the portfolio over the years before your retirement, to ultimately build up the portfolio that suits you.
“So finally, when you do retire, you’ve locked in a personalised safety net so you know … you’ve got a base level cash flow coming in to match your required, planned expenses.”
Mr Dunchesne said that the introduction of compulsory super shifted the outcome risk of retirement to retirees and that the accepted model of “invest and hope” has hindered the ability for investors to plan for retirement.
Endowment bonds allow investors to determine the start date of the bond and its underlying investments.
He said that this level of control is likely to appeal to trustees from the self-managed super fund (SMSF) sector.
“Endowment bonds allow trustees of SMSFs to start up and plan for regulator income in pension phase and they can start the process years before they actually do retire,” Mr Duchesne said.
“That is to say you can start now and properly plan while you’re still in accumulation phase.”
