Posted By My latest MoneySense Retired Money column looks in-depth at a new “Decumulation” offering from Sun Life, unveiled late in September. You can find the full column by clicking on the highlighted headline: What is Sun Life’s new decumulation product?
As you can see from image below taken from MyRetirement Income’s website, the emphasis is on providing regular income to last to whatever age a retiree specifies. That income is not, however, guranteed as a life annuity would be.
The Globe & Mail’s Rob Carrick first wrote about this shortly after the Sun announcement. My column adds the opinions of such varied Canadian retirement experts as author and finance professor Moshe Milevsky, retired actuary Malcolm Hamilton, Caring for Clients’ Rona Birenbaum and Trident Financial’s Matthew Audrey, as well as Sun Life Senior Vice President, Group Retirement Services, Eric Monteiro.
Some of the more cynical takes are that this is a way for Sun Life to continue to profit from client financial assets gathered during the long accumulation phase, rather than seeing them migrate to other solutions, such as annuities provided by either one of its own life insurance arms or that of rivals.
Aiming for Simplicity and Flexibility
As Sun’s Eric Monteiro told me in a telephone interview, the company’s preliminary research found that rival products that were first on the market (see full MoneySense column) were often perceived as complicated, and as a result uptake of some of these pioneering Decumulation products have been underwhelming. It sought to create a solution that was relatively simple and flexible.
In essence, it is not dissimilar to some Asset Allocation ETFs, such as Vanguard’s VRIF, which is 50% equities and 50% fixed income. But Sun’s product may and probably will have different proportions of the major asset classes. In fact, it lists 16 external global money managers who deploy up to 15 different asset classes, which include Emerging Market Debt, Liquid Real Assets, Direct Infrastructure, Liquid Alternatives and Direct Real Estate. Managers include BlackRock Asset Management, Lazard Asset Management, Phillips, Hager & North, RBC Global Asset Management and its own Sun Life Capital Management.
But can this be described as “first of its kind in Canada?” — a claim made in Sun Life’s marketing materials.
Noted finance professor and author Moshe Milevsky is skeptical about that. He told me he’s “not sure I agree with their ‘first of its kind in Canada’ billing. He noted that Guardian launched a similar product a few years ago, which they called GuardPath Managed Decumulation fund. “Perhaps by adding a slightly different asset allocation, or different maturity date, or even a different colour brochure, this entitles others to use the term ‘first.’ “ Milevsky disclosed that he did help Guardian design its “Modern Tontine” product.
No guarantee but “admirably simple.”
Retired actuary Malcolm Hamilton, a senior fellow at the C.D. Howe Institute, told me that this new Sun Life product looks “relatively straightforward.” He says: “It’s not a tontine or annuity, there’s nothing there that suggests longevity pooling… It’s arguably useful to those comfortable with picking a maturity year… essentially the year beyond which neither you nor any dependent spouse expects to live. The product then tells you how much income you can draw.”
It’s admirably simple,” concludes Hamilton. It will “force people to think about how long they’ll live and how much they can spend.
