Retirees turning to managed investment funds for extra income
Retiree population in Tasmania hits +100,000. Tasmania has the highest proportion of people in Australia aged +65 years.
Hobart, Monday 2 September 2019: As interest rates hit new lows, Tasmanian Perpetual Trustees, is seeing Tasmanian retirees increasingly turn to higher yielding income funds as they seek to lift returns from their savings.
Following the Reserve Bank slashing official interest rates to record lows in July, the 132-year old wealth business has been experiencing greater inflows into its income funds as retirees seek out viable investment options.
As Australians look for higher yielding income funds, Tasmanian Perpetual Trustees is particularly seeing a resurgence of interest in its Select Mortgage fund - a type of managed income fund. Mortgage funds pool money from private investors and lends it out as mortgages on residential, industrial and commercial property. In return the fund pays investors a regular income after fees, costs and charges.
The growth in the mortgage fund category in Tasmania is mirrored on the mainland with the sector growing by 60% in the last 12 months, taking funds under management for the overall sector to over $10 billion1.
“Tasmania is home to the country’s oldest population”, said General Manager of Wealth Management, Craig Mowll. “Retirees around Tasmania are living longer, healthier, more active and need to plan for a retirement that could be over 20 years”.
“Thousands of retirees in Tasmania are in search of income options from their existing savings and investments in a low interest rate environment. While lower interest rates are good for those with variable rate mortgages, it potentially makes life hard for Tasmanians living off their retirement savings”.
“The strong interest in managed income funds is being driven by a combination of the higher yield, regular income and Tasmanian Perpetual Trustee’s long-term track record in managing credit risk and the trust in our brand.”
Tasmanian Perpetual Trustees estimates there are now 100,000 retirees2 in Tasmania living off their retirement savings. According to statistics, Tasmania also has the highest proportion of people aged 65 years and over among the states and territories.
Tasmanian Perpetual Trustees (now TPT Wealth) offers a range of managed income funds and mortgage funds that balance capital stability with consistent investment returns and are popular amongst investors looking to derive an income from their investment. Tasmanian Perpetual Trustees believes these managed income funds have had a growing appeal because they meet the individual’s criteria for yield, regular income and risk profile.
However, Mr Mowll warned investors that not all managed income funds carry the same level of risk and that some retirees may be taking on unknown risks attracted by high headline returns. He advises retirees to be very comfortable with where they are putting their nest egg and to fully understand that managed investments are not a bank account or term deposit and have a different risk profile. Also, the types of different funds and risks of different managers can vary widely so it is important to read and understand the Product Disclosure Statement before deciding whether to invest in a fund.
“There are ways retirees can get a better return on their hard earned dollars. However, before an investor dives in and gets attracted by an appealing headline rate, they need to make sure they review the product’s investment strategy, asset allocation, risk profile, track record and the manager’s reputation,” Mr Mowll said. “However always remember, past performance is not a reliable indicator of future performance.”
1 SQM Research
2 Source: “Retiree population in Tasmania hits +100,000”. Population of Tasmania = 520,000 (www.population.net.au/population-of-tasmania/). Percentage of Tasmanian population over 65 = 19.7% (https://nationalseniors.com.au/news/latest/proportion-of-older-australians-continues-to-rise). Population in Tasmania +65 = 102,440 (520,000 x 19.7%)
