Demand For Lifetime Annuities in Australia

Demand For Lifetime Annuities in Australia

A recent Melbourne Business School research report concluded that there is indeed a demand for lifetime annuities in Australia.

Superannuation funds and financial advisors offering retirement income products will have special interest in these results, offering the latest pulse of Australian retirement thinking.

Averages can be misleading

Whilst account-based pensions dominate allocation preferences on average, the researchers warn that averages can be misleading. They identified distinct audience segments with their own particular behaviours. One segment, comprising 18% of respondents, showed a clear preference for lifetime annuities and other annuity options.

“The research has major implications for policymakers, financial planners, fund managers and others working in the financial or retirement sectors.” ~ Dr Teagan Altschwager

“There’s a belief out there that Australians ‘hate’ annuities, which is a strong word but it’s the one that gets used,” said Senior Research Fellow Teagan Altschwager.

The research shows that there is indeed a demand for annuities and that superannuation funds should not typecast all their retirees as having similar needs and product preferences. The message is clear: superannuation funds need to diversify and cater for a wide range of needs in retirement.

The power of three

The researchers asked respondents to imagine they had a certain amount of retirement savings to allocate across seven retirement income options and noticed an interesting pattern in respondent behaviour. On average, respondents allocated funds across only three main options.

The message for superannuation funds is that when promoting retirement income products, they need to be aware of  the decision-making process. The preference for limiting spread to only three products strongly suggests that choices involving more than three options are too many for a member to meaningfully or comprehensively evaluate, particularly when dealing with complex retirement income products.

See here for the full report.

Download Report

Dr Altschwager and Associate Professor Evans from the Melbourne Business School will host a webinar on 20 May to share the findings from this major quantitative study. If you are interested in attending, register here.

Webinar Registration


The Optimum Pensions Real Lifetime Pension is an investment linked lifetime income stream where the assets stay in investment options managed by the superannuation fund but longevity risk is transferred to a global reinsurer. Find out more Real Lifetime Pension.

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