Administering the Real Lifetime Pension

Administering the Real Lifetime Pension

Administering the Real Lifetime Pension

The Real Lifetime Pension is a new concept in retirement income solutions that Optimum Pensions has developed to address longevity risk and provide greater peace of mind for all Australians.

When we meet with superannuation funds, one of the common questions is, “How hard is it to administer the Real Lifetime Pension?” The answer –

It is straightforward to administer the Real Lifetime Pension

One of the advantages of the Real Lifetime Pension is that it is straightforward to administer. Essentially, if you can administer a unit-based Account-Based Pension and you manage Group Life Insurance in your accumulation products then you can administer the Real Lifetime Pension.

As with any new product, there are system and procedural changes required, but we have a step-by-step implementation plan to make it easy. Once the Real Lifetime Pension has been set up, the ongoing workload is largely carried out on the administration platform with minimal human processing.

Where do you start?

As with all superannuation products, the starting point is the member record. Unless the person buying the Real Lifetime Pension is new to the fund, you will already have the details you need. If the member is purchasing the reversionary option then you also need to the spouse’s details (if you do not already have these). Bank account details for the pension payments are also required.

What else will you need?

You will need to record the purchase price (ie how much the member invests in the Real Lifetime Pension) and the product options they choose. These include:

  • The Investment Option(s)
  • Whether or not a Spouse Pension is included and what percentage will apply
  • Whether or not a Guarantee Period is chosen and how long
  • Whether or not a Death Benefit is included and what amount

The decision as to which of these product options to include rests with the Fund. As a white label product, one of the benefits of the Real Lifetime Pension is its flexibility, and funds can configure the product, so it is suitable for its members needs.

What happens next?

Once you have collected the above information and decisions, the system will calculate the pension factor to be used and the number of pension units that will be paid each year for the rest of the member’s life, and to the spouse, if that option has been selected.

An account is created to record the various data and transactions as well as enabling various calculations to be made at any time. This account is for internal operational purposes and not subject to the same type of reporting that would apply to an accumulation account or an ABP.

What data is recorded?

The data recorded includes:

  • The original purchase price
  • The pension factor used to determine the number of units to be cancelled each year
  • The unit prices for each investment option
  • The number of units to be converted to a pension payment each year for each investment option
  • The insurance premium rate(s)

What are the types of transactions that are recorded?

The transactions recorded include:

  • The payments made to the retiree
  • The insurance premiums deducted (if these have not been deducted from the unit price)

What are the calculations?

This is the Optimum Pensions algorithm that ensures that the fund has the assets to pay the future pension payments. The calculations cover:

  • A projection of the expected number of units to be paid each year (based on life expectancy)
  • A calculation of the expected value of the future payments
  • The value of the notional account or the actuarial reserve

What reporting is required?

The fund provides regular reports to the reinsurer on the Real Lifetime Pension members covering dates of birth and insurance premiums as well as reporting the deaths that occur. This type of reporting is not that unique but will require some system configuration that Optimum Pensions can assist with.

Since the Real Lifetime Pension is an income stream rather than an account based product, the member reporting requirements are less detailed so this simplifies the reporting.

Are these requirements unusual?

Most of this data and transactions, calculations and reporting are similar to what already exists on other parts of your administration platform. For example, an Account Based Pension records units, unit prices and payments and calculates the value of the account. Similarly, accumulation plans that have group life insurance record the premiums.

The additional requirement is the projections of the expected payments. Many funds already have quote engines that carry out similar projections.

Is the Real Lifetime Pension really that easy to implement?


Optimum Pensions has had good discussions with the major superannuation administration software providers and administrators to discuss what would be needed, and no obstacles to implementation have been identified.

There is a range of supporting material to assist with all aspects of the implementation and once set up, the ongoing administration is straightforward.

Why is expanding retirement product offerings important for members?

Funds can no longer just rely on only offering an Account Based Pension if they are going to meet the best interests of all their members. New retirement solutions are required to be on offer for members concerned with longevity risk and outliving their retirement savings.


The Optimum Pensions Real Lifetime Pension is an investment linked lifetime income stream where the assets stay in investment options managed by the superannuation fund but longevity risk is transferred to an insurer. Find out more Real Lifetime Pension.

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