Sir Michael Cullen joins Lifetime

Former Deputy Prime Minister, Sir Michael Cullen has joined the board of Lifetime Retirement Income.

As Finance Minister, Cullen was the driving force behind the creation of KiwiSaver and the NZ Super Fund.

Now, 10 years later, Cullen will play a part in helping KiwiSavers turn their nest eggs into a lifetime income.

People buy annuities to give them predictable retirement incomes. Annuity buyers hand over their savings to an insurance company, which invests them in cash, bonds and shares.

With traditional annuities, once investors had handed over their money they could not get it back, and when they died, the amount they invested was lost.

Traditional annuities never caught on in New Zealand, but the success of KiwiSaver means there's growing demand for lifetime incomes from people reaching retirement.

While RIG's variable annuities provide a guaranteed income for life like traditional annuities, they also allow people to get their money out, should they need it.

Cullen said joining RIG felt like "completing the square" that KiwiSaver had begun.

"I've been interested for quite a while in the business," he said.

KiwiSaver was created to help New Zealanders save during their working lives so they would have a better standard of living in retirement, he said.

RIG's annuities provided KiwiSavers with the ability to convert their KiwiSaver nest eggs into guaranteed income.

"As the population continues to age and KiwiSaver members move into retirement it is important they have reliable options to support their income throughout their retirement", Cullen said.

While he's done his due diligence on RIG before becoming a director, Cullen stressed: "It seems to me to be a viable proposition, but people should still be seeking advice before signing up."

Cullen is not the first big name Stewart has signed up for the board.

Former retirement commissioner Diana Crossan, and Fairfax columnist and financial adviser Martin Hawes, are also on the board.

RIG, which is regulated by the Reserve Bank, now has investors with over $35m of superannuation and retirement assets.

As well as investing their money in return for giving customers a fixed income for life, RIG uses the fees it charges investors to buy "longevity insurance", which ensures that a person does not outlive their money.

In years where investment returns were less than income payments, investors' capital would be used to fund the difference, RIG said. The capital was insured so when it was depleted, the investor continued to receive the same level of income until their death.

Should an investor need their money back at any time, they will be able to withdraw their remaining balance, but would lose their annuity income as a result.

This article was originally written by Rob Stock and published on stuff.co.nz and the Dominion Post on 13/02/17. Read the original article here

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