Helping provide greater confidence in members' retirement

For some people, the thought of their retirement invokes images of life on the road as a grey nomad, or finally finding time for their passion project. However, for many Australians there is the fear of the unknown, especially how they will be able to support themselves financially.

While retirement for some is a reward for years of dedicated and hard work, given the complex financial decisions which need to be made it’s not surprising that many Australians feel overwhelmed, and struggle to balance the competing retirement income needs of flexibility, certainty and longevity. As highlighted in the Retirement Income Report released last year, this results in many retirees leaving behind large and often unintentional bequests, foregoing a higher standard of living during their working life and into retirement.

The Retirement Income Covenant, which is subject to the passage of legislation and is expected to come into effect on 1 July 2022, is an important step by the Federal Government in encouraging the further development of the retirement phase of superannuation. The covenant places a key obligation on trustees to formulate, review regularly and give effect to a retirement income strategy outlining how they plan to assist their members to balance key retirement income objectives.

For some time now, we’ve been working with our fund partners and undertaking detailed research with members to understand the needs of retiring Australians and to consider how best to present retirement solutions. In recent innovation sprints that we have run with our partners, there were three key insights we uncovered:

• Psychological preferences matter more than member cohorts. We delved into behavioural economics to help understand the importance of psychology in decision making and it goes beyond grouping members by characteristics such as account balance or age.
• There’s an element of cognitive bias in how people plan for retirement, by understanding what these are we can design solutions that resonate with members.
• Retirement is more than one single solution that provides financial certainty to members as they grow old. Different strategies can be offered to members through a common foundation with the right level of upfront thinking.

A fear of the future and lack of knowledge about retirement

With an ageing population, a larger number of Australians are looking at how they can continue living the same lifestyle they’ve enjoyed in their retirement

Earlier this year, TAL engaged 1,023 superannuation fund members through a YouGov survey. It collected and analysed perspectives for people approaching retirement as well as those over 65 and no longer working. Understanding Australians challenges and concerns in retirement and pre-retirement is critical to ensure products and services in the market cater to their needs and give them greater confidence in their future.

From our perspective, the results highlighted the following key actionable insights:

• More education is needed on retirement financial management opportunities i.e. resources on how lifetime income streams (including annuities) complement their super and how it can benefit them in retirement.
• When retirement products are developed, they should have a level of flexibility to ease the stress of unexpected events, for example, a cooling off period, financial hardship clause or complimentary support services.
• Enhancing retirement solutions to assist with health prevention support to ease the burden of concern for declining physical health as they get older.
• Nearly a quarter of participants within the super balance range ($200k to $500k) were comfortable with putting some of their super away to fund their later retirement needs, as super balances increased, so do the willingness to commit to a retirement income product with a deferral period.

Continuing opportunities for member engagement

Both life insurers and superannuation funds have a part to play in supporting and protecting Australians against the life and living risks that they face from their first job and through retirement.

We believe there is an essential role for life insurers to work with you to ensure that retirees have greater choice and access in their superannuation benefits. For us at TAL, we take the responsibility to work with funds to improve the retirement outcomes of their members seriously. This is important work and like many in the industry, we were pleased to see the policy direction outlined in the Retirement Income Covenant draft legislation continues to embrace a flexible, principles-based approach.

The approach will enable trustees and insurance in superannuation providers, to utilise their combined knowledge and experience of their member base to develop retirement income strategies that are more suited to them, improving the sustainability of the industry and the retirement outcomes of members.

Get in touch to learn more

If you’d like more information about TAL’s retirement income solutions for your members, please get in touch with your TAL Client Manager.