Imagine spending 40 years quietly enabling someone to avoid thinking about retirement and then suddenly, miraculously, at the point of retirement needing them to become an expert and take over the problem.

This is exactly what’s happening in Australia’s superannuation system. 

Australia has a compulsory retirement savings system. Countries like the UK use behavioural techniques to nudge people into saving such as automatic enrolment, which is becoming a poster child for financial services globally. Both systems are good at pushing people to save but are they then leaving people stranded at retirement?  

How can we help people to get the most from their savings once they retire? This article was inspired by a webinar by Dr Greg Davies of Oxford Risk in the UK. 

The Engagement Paradox 

The behavioural assumption that underpins compulsion and nudge approaches is simple: if we leave people to their own devices, they very often can’t or won’t solve complex problems by themselves. They instead postpone and avoid difficult decisions.  

As humans, we get emotionally uncomfortable when faced with complexity. This includes decisions like: 

• Whether to contribute to superannuation 

• Making investment decisions 

• Choosing how much to draw and spend from savings each year after we’ve retired 

When it comes to saving, the cost of making contributions is felt today. The pain of actually having to engage with this complex problem is immediate, yet the benefits are far off in the distance. All around the world we see that people simply don’t engage with retirement saving. 

The interesting thing about compulsion and automatic enrolment is that they don’t actually engage people. Neither approach gets people to think about what is the ‘right’ solution. In fact, they are an invitation to disengage because they convey the idea that the government’s ‘got my back’. Someone clever has thought about this on my behalf, so I don’t have to think about it. 

When Disengagement Becomes Dangerous 

Unfortunately, this can perpetuate disengagement in a way that is dangerous once people suddenly retire and get access to a large pot of savings. 

Despite the system being designed to combat disengagement throughout most of people’s working lives, the behavioural design principles swing 180 degrees in the opposite direction at retirement!  

Suddenly everyone is expected to tackle this really complex problem—at the moment when it really matters to them both financially and emotionally. This creates a fundamental problem because retirement decisions involve high levels of complexity and uncertainty.  

What happens when people don’t know what to do? They step aside from that problem. They ‘choose not to choose’. We have a situation in Australia where we are leaving superannuation members with the ‘nastiest, hardest problem in finance’ once they stop working. Only a minority of Australians seem willing or able to engage a personal financial adviser. 

The Product Selection Dilemma 

We might be providing good options in the market such as annuities, account-based pensions and investment choices, but what we typically don’t do is to help people with good tools to enable those decisions, to make answering their big retirement questions easy [1]. 

Instead of simply nudging or compelling people while they are working, we need to also provide a safely designed journey for people who cannot or will not make the retirement decisions they need to once they arrive there. 

There is a particular problem with retirement product decisions. The product type that most superannuation funds offer their members in retirement (an account-based pension) means focusing on investment choice. Whereas a ‘lifetime income’ product (aka annuity) means focusing on the income level you’ll get throughout retirement. These topics of investment choice and income level are often treated as problems that are entirely separate to each other. In reality, the decisions of what is the right level of retirement risk for you to take and how much you can safely draw from your savings in retirement are inextricably linked. What you do on one side influences what you should do on the other side. 

If we treat these problems as separate, we’re not providing clarity —we’re creating a fog of confusion that makes it harder for people to find the right answers. In doing so we raise the risk of them doing nothing at all and being in a worse situation as a result. 

Why Consumers Don’t Ask for Lifetime Income Products or Annuities 

A lifetime income product or lifetime annuity is a financial product the provides a regular income stream for as long as you live, no matter how long that may be.  It is designed to address one of the biggest risks in retirement – the risk of outliving your money. 

Some advisers and superannuation trustees highlight that Australian consumers don’t specifically ask for lifetime income products or annuities to be included in the mix at retirement. However, this perspective misses the mark. 

Consumers don’t have an ‘appetite’ for lifetime products or annuities because they don’t have an appetite for any particular retirement product type until they’re taught about them or told to do so. Don’t forget their participation in the system was automatic, not driven by appetite or demand.  

The Behavioural Economics Team of the Australian Government found that once the options and key features were explained clearly to people, around half of superannuation fund members chose the solution that includes a lifetime income promise, trading off other objectives to do so. 

It is clear that people’s appetite for lifetime income solutions and annuities is very much dependent on what they are shown or told. In today’s system, most retirees aren’t being shown how much guaranteed income makes sense for their situation or how to calibrate the relationship between their spending decisions, investment decisions and run-out risk. Even the Government’s retirement calculator, found on the ASIC MoneySmart website, omits them entirely [2]. 

Consider what this means: People’s appetite for guaranteed or lifetime income is very much dependent on what they are shown or told. Any lack of demand for lifetime products is less about people not having an appetite for them and more about the fact that people aren’t seeing them introduced or explained to them. 

They aren’t being shown: 

• How much guaranteed income makes sense for their situation 

• How to balance spending in retirement with run-out risk 

• The difference between different product types in light of their personal preferences and trade-offs 

The reality is that people’s appetite to use a retirement product like lifetime annuities is learned rather than natural. The whole point of nudge techniques is to make people much more comfortable about their choices (or non-choices). 

Because these decisions are learned rather than natural, lifetime income products and annuities are not ‘bought’. Instead, it’s a case of someone needing to suggest and explain them [3]  

The prevalence of account-based retirement products in Australia is likely due to that being what’s always been put in front of people—more a function of tradition and familiarity than genuine customer appetite. 

How to Radically Improve Things 

To really get this right, to help people in an unbiased way, we need to move to a position of helping them articulate their retirement objectives and preferences more clearly, in terms of attributes that do matter to them—that people do have an appetite for.  

We need technology to capture and link client objectives (like safe spending requirements, bequest motives and access to liquidity) and empower confident decision making including configuration of product solutions that fulfil those objectives [4] 

We must resist the urge to pre-define what customers want to fit the features of the products we’ve historically offered. 

The process must be reversed, starting with people’s genuine needs, free from any bias. 

Government Pensions as a Reference Point 

If we look at government pensions offered globally, including the Age Pension in Australia, the objective is clear: to deliver an income for life after each person’s salary ceases. People might wish that the level of their government pension was higher, but rarely is there any pushback or complaint about the design of benefit: regular payments for as long as each recipient lives. 

Contrast this with the dominant superannuation product put in front of retirees in Australia (an account-based pension) where the objective they exist to fulfil seems much less clearly defined. Perhaps as a result of this ambiguity, there is fierce debate about whether these account-based solutions efficiently deliver on what retirees genuinely need. 

Superannuation funds and financial advisers may justify steering people to account-based products for the goals of flexibility and liquidity. But this product type leaves consumers with concerns about risk, fear to spend and running out, leading to retirees as a demographic often underspending relative to what’s actuarially possible from the assets they were forced to save.  

The consequence of this design is that almost all retirees then either:  

(a) do run out of super in retirement, or  

(b) pass away with much of their retirement savings left unused.  

Both are unlikely goals of an efficient retirement system. 

The Australian government is concerned that the tax concessions in the superannuation system ultimately may result in it being a massive inheritance scheme more than an efficient retirement income system. 

The Path Forward 

Australia and the UK both need good technology that can accurately and efficiently help each individual work out their preferences when it comes to the core objectives for retirement. This also needs to consider their capacity for securing their living costs for life.  

Behavioural tools combined with personalised projections are the key to this—and are vital in empowering retirement product choices for each customer. [5]  

What this means for financial advisers: Instead of assuming what clients want based on status-quo product features, we need to help each client discover their genuine retirement objectives first, explore risk and goal trade-offs, then match products to meet those needs. 

The solution isn’t just around products—it’s better ways to help people understand what they actually want and need in their retirement years. 

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[1] Yes, there are many online retirement calculators available, but these are often criticised when it comes to confidently implementing the decisions people need to make: superconsumers.com.au/media-releases/serious-failures-in-super-fund-retirement-calculators/  

[2] As of June 2025 

[3] See our case studies for some of the benefits of using lifetime income products. 

[4] This doesn’t preclude the development of multiple segments of retirees who have similar preference sets to each other, and creating a menu of configured product solutions. 

[5] Oxford Risk are working on such tools for use by advisers in the UK.