Most expect only ‘basic’ lifestyle in retirement: Challenger

In news that will go some way to validating the concerns that have paved the way for the Retirement Income Covenant, a survey from Challenger has revealed that only 40 per cent of people expect a “comfortable” lifestyle in retirement, with the majority expecting only a “basic” lifestyle when their working life ends.

Younger people are significantly less positive about their future retirement lifestyle than their elders, the survey found, with only 35 per cent of under 55s expecting a comfortable retirement compared to 46 per cent of over 55s.

While the age disparity is likely linked to the comfort over 55s get from seeing their superannuation balances swollen by further contributions and compounding interest, the results highlight a broad concern among the populous that their retirement savings won’t be enough to see them through.

It’s an issue that was canvassed extensively in the government’s Retirement Income Review and is expected to be catered to by the proposed Retirement Income Covenant (RIC), which should force super funds to provide more support for retirees in the decumulation phase.

According to The Conexus Institute’s David Bell, the RIC could also present both a challenge and an opportuntiy for retirement advisers as funds either themselves or in partnership with providers bring an “avalanche” of pension products into market.

“The range of retirement solutions offered by super funds is likely to be large,” Bell explained to Professional Planner in April.

“Some funds may white-label external annuity products. Others may create pooled solutions which bring confronting terminology such as group-self annuitisation. All these solutions could be offered in either lifetime or deferred (whereby income payments begin at a deferred age) formats,” he continued. “Sounds complex!”

While the pension and annuities market in Australia is historically challenged – The Actuaries Institute conducting a study called Why Don’t Australians Buy Annuities? – Challenger is one of the market players positioned to pick up on any RIC tailwinds.

Accordingly, the provider was quick to point out that 67 per cent of the 3,000 superannuation members who took the survey said they would find a guaranteed lifetime income product as well as regular payments that moved with market performance “appealing”.

“This survey shows that super fund members have an interest in solutions that balance their risks in retirement, which really speaks to the purpose of the Retirement Income Covenant,” commented Challenger’s head of retirement income research, Aaron Minney.

“It’s really clear that the majority of members are concerned about outliving their savings so it will be important for funds to find solutions that will help overcome this concern, support members with plans that help them understand retirement risks, and ultimately lead to better financial outcomes for their members.”

CREDIT: Original article written by Tahn Sharpe for Professional Planner

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