Investment Trends: understanding retirement needs

TAL recently partnered with Investment Trends to develop the TAL and Investment Trends 2023 Retirement Income Report. The research is based on a survey of over 10,000 pre-retirees and retirees, and covers a range of topics including financial confidence and knowledge of retirement products. It highlights the important role of retirement specialists, including super funds, in providing guidance to members to help them navigate the complexities of retirement.

Building financial confidence in retirement

The study found that 65% of pre-retirees don’t know about existing retirement income products offered by their super fund. Of those who are familiar with retirement products like pensions or lifetime income streams, many have a limited understanding of how they work and the benefits of each.

Though awareness of the different types of retirement products remains low, respondents are clear on the product features they value most. While fees remain an important consideration for pre-retirees (57%), features deemed very important when selecting a retirement income product include having an income that will last for life (52%), receiving guaranteed minimum payments (47%), and having flexible access to capital (43%).

“Over half of respondents say that income for life is a top consideration when selecting a retirement income product,” said Ashton Jones, TAL’s General Manager of Growth, Retirement & Wealth Partnerships.

“This shows that members value holistic superannuation retirement propositions that provide them with the confidence of a regular income for as long as they and their partner live.”

The research also showed that having a good understanding of retirement income options leads to better outcomes for members and improved perceptions of their fund. With just one in five non-retirees (20%) certain that they will remain with their current super fund in retirement and 34% stating they intend to get advice, this reinforces the value of proactively providing members with product information in the lead-up to retirement.

How insurers and super funds can work together

By working together, super funds and insurers can deliver retirement solutions that combine a lifetime income with flexible access to capital, giving retirees the confidence to spend and improving their retirement outcomes. This collaboration extends to engaging and educating members so they are fully equipped to make informed decisions when presented with retirement options.

“We know many Australian retirees are reluctant to draw down their super balance in retirement for fear of outliving their savings, particularly with the expectation that they’ll need to fund future health and aged care costs. They are living frugally and not enjoying the lifestyle they can afford,” said Ashton.

“Lifetime income products can help lessen these concerns, by maximising a member’s expected retirement income, helping them manage and plan for risk, and providing flexible access to their funds in retirement.”

We look forward to sharing further insights from this research with you in 2024.