The founders of niche superannuation fund GROW Super say they are casting their net much wider than the millennial market, with plans to use a recent $2.5 million cash injection to launch a new pension product.
GROW co-founder Mathew Keeley, who is also a financial adviser, said one of the biggest fears people had in retirement was that they might have to return to work if their retirement funds ran low, leading to GROW wanting to “build something that gave people a certainty in retirement”.
Mr Keeley said the fund “challenged” $650 million global investment manager Dimensional Fund Advisors, which also partners with GROW to offer its seven investment options, to create something with them that would give people certainty of income, with flexibility around capital drawdowns
But co-founder Josh Wilson said the product, which will be launched in early 2018, would not be an annuity but rather a “hybrid” created with help from Dimensional’s team, which includes director Eugene Fama, who won a Nobel Prize for economics.
“Annuities are great for delivering certainty of income, but they come with serious constraints including high costs and issues around realisation of capital upon death,” Mr Keeley said.
“Our portfolios will hedge against rising inflation and changes in interest rates, but will differentiate in the sense that members will have the ability to increase or decrease their pension payments based on their retirement needs. Under an annuity you will receive ‘X’ number of dollars each year. We all know living costs in retirement vary each year.”
Challenger is the country’s largest annuities provider, holding around 90 per cent of the market.
Mr Keeley said he hoped the launch of its pension product would put paid to the notion that GROW was pitching itself purely at the millennial market.
“I find it hilarious that we were described as a millennial fund because we’re not here to target millennials in any way, shape or form; we’re here to target people with our values. Our mission is to be the best super fund in the market without a doubt, for investment, insurance and just general wellbeing,” he said.
GROW recently closed a $2.5 million series B funding round, taking its total to more than $4 million. Last week it announced it was reducing its fees from 1.85 per cent per annum to 0.95 per cent, plus $1.50 a month for administration. According to Rice Warner the industry average is 1.03 per cent per annum.
At the same time GROW released an update to its original app that lets members change and transfer insurance cover and opt in to income protection insurance real time.
“We wanted to make sure anyone that was coming over who had conditions in their original super fund they might not be able to get because of registering as a new member, would be able to bring that insurance over, so we’ve built real-time transfer of cover to do that,” Mr Wilson said.
GROW’s insurer is Hannover Re.
This article was originally published in the Australian Financial Review and written by Alice Uribe. For the full article click here.