Superannuation can be easy to set and forget, especially as retirement approaches. This can make it harder to plan confidently for retirement. Even today, a common assumption among those approaching retirement is that superannuation will simply be withdrawn as a lump sum once they finish working.
While this approach may suit some retirees, it can also create challenges. Retirement often spans several decades and turning savings that were accumulated while working into a sustainable income stream in retirement may require careful planning.
Financial professionals generally emphasise the importance of long-term planning in retirement. Keeping funds invested within a pension framework, rather than withdrawing everything at once, can support more consistent income and avoid the possibility of outliving your savings.
Additionally, the transition from saving to spending often requires a different investment mindset. Rather than focusing primarily on maximising growth, many retirees prioritise dependable income and reduced volatility.
An investment option developed with these considerations in mind is CPIplus, specifically designed for retirees and only available through a Hostplus Pension account.
Seeking greater certainty
Investment priorities typically shift once regular employment income stops. Growth assets such as shares may provide higher long-term returns, but their short-term volatility can make budgeting more difficult for retirees who are drawing down their life savings. On the other hand, more defensive assets like cash or bonds may offer stability but can often struggle to keep pace with inflation.
CPIplus is designed with a best-of-both-worlds approach. It aims to provide a return that is more consistent and less volatile than growth assets and generally higher than defensive assets such as cash and bonds.
For retirees focused on predictability and stability, this type of investment could help reduce reliance on timing the market when funding everyday living expenses.
How CPIplus determines its returns
One distinguishing feature of CPIplus is that the target return is set in advance for a defined period and doesn’t fluctuate with daily market movements.* The target return is calculated using two components:
Together, these elements are designed to produce a return that is set at a level above CPI.
Because the return level is fixed for the defined period, it shields it from the impact of short-term performance of the underlying investments.
A lesser known but important feature of CPIplus is that it has a daily return floor of zero, meaning investors will never receive a negative return for any period. This feature is designed to reduce the psychological and financial impact that market downturns can have on your retirement.
As with any financial decision, the right approach will depend on your personal goals, risk comfort and income needs in retirement. But for those looking for more structure and stability than a lump‑sum withdrawal can offer, options like CPIplus within a pension account can provide a clearer path forward.
By keeping your money working for you and reducing the impact of short-term market swings, a well-designed retirement investment strategy can help you feel more confident about sustaining your lifestyle for the long term.
*Though returns above inflation are predetermined annually, Hostplus can shorten the return period. Hostplus may also adjust the rate of return with at least 30 days’ notice. You must have a Hostplus Pension account. General advice only. Consider the Hostplus Pension PDS and TMD available at hostplus.com.au, and your objectives, financial situation and needs, which have not been accounted for, before deciding. Past performance is not a reliable indicator of future performance. Issued by Host-Plus Pty Limited ABN 79 008 634 704, AFSL 244392 as trustee for the Hostplus Superannuation Fund ABN 68 657 495 890.