Orford comes back to launch a new form of annuity incomes


David Orford is back. Just over a year after selling his big super fund admin firm, Financial Synergy, to IRESS he has launched a new-style annuities provider, Optimum Pensions, which he believes can be transported to other countries as well as satisfying the pent-up Australian demand.

Joining with Peter Rowe, the head of sales and marketing, and others, Orford says, with only a hint of a smile: “we want to change the world”.

Orford says he has been having discussions with Government treasurers and assistant treasurers on the problems to do with annuities for years. The main problem has been that not enough people buy the ones on offer, such as those from Challenger and Commonwealth. Optimum Pensions will offer something more palatable and a lot cheaper, he believes.

The tax law finally changed this year, thanks to assistant treasurer Kelly O’Dwyer, who included in a raft of changes, including closing a transition to retirement loophole, the inclusion of lifetime annuities in the concessionary landscape and changes to the treatment of defined benefit pensions.

Orford says what Optimum Pensions does is to separate the investment responsibilities, as accepted by the super fund or SMSF trustees, from the insurance. While the targets for the new firm’s service includes retirees in all the major groupings, including individuals, the main emphasis initially will be on big super funds and life insurance companies.

For a super fund, it can still invest the assets of the member and retain the member’s account. It does not need at outsource partner, allowing the fund to keep control.

“We are also lower priced than the main providers of the moment,” Orford says. “We are interested in taking the model to other countries. On my reckoning there are only four countries that do this well… The hard bit is selling it to the members, although we need to sell it to the fund first.” They are Chile, Switzerland, Denmark and Sweden.

“It’s a bit like the music has stopped and everyone should be sitting down, but they’re not,” he says.

The problem with members is that they are worried that if they die earlier than expected, they will lose out on a lot of their savings. This can be accommodated with, say, a minimum payment period of 15 years into retirement – payable on death.

Administration of the system is simple for any super fund or life insurance company which already has account-based pensions. Orford, who spent nearly 30 years developing systems at Financial Synergy, says most funds won’t need a new external provider.

One of the more interested Government ministers with whom Orford dealt over the years was the former Labor Senator Nick Sherry, who was the country’s first minister for superannuation. Orford recalls Sherry saying, words to the effect: “This is the last great reform of the superannuation system… It will prove an income for people for the rest of their lives.”

Coincidentally, Peter Rowe, has had a long history in super funds administration, including a stint at admin firm FNZ, of which Sherry is executive chair.

The new business is being funded by Orford’s family trust.

– Greg Bright