Helping Retirees Spend with Confidence

Here we are, almost at the end of 2021. A year most Australians will gladly put behind them as we look towards better days ahead with the arrival of the new year. As we make our own plans, promises and readjustments to life from the learnings of the previous year, it is similarly time for all superannuation trustees to plan towards 2022. To consider the measures they will make within their own funds to adjust retirement income strategies, as we move closer to the retirement income covenant taking effect from 1 July 2022.

The new financial year will cement the obligation, subject to the passage of the legislation, for superannuation trustees to have a retirement income strategy for members, including understanding the needs and preferences of beneficiaries when formulating their strategy.

Developing retirement income strategy

The Retirement Income Review published in November 2020 outlined a range of measures that could help retirees have the confidence to use their assets more effectively. Included in the Explanatory Materials was the suggestion that trustees should consider the preferences of retirees about (amongst other things) managing longevity risk.

So, what do we know about retiree attitudes to longevity risk?

Retirees and retirement confidence

We know retirees want to feel confident in retirement so they can enjoy their life and not worry about running out of savings. But since we don’t know exactly how long we will live; this question is really about tolerance to longevity risk.

Over 3,000 people have used the Optimum Pensions Lifespan Calculator to help estimate their personalised life expectancy, and explore the question,

“How confident do you want to be that your retirement plan can last as long as you live?”

The calculator offers a selection of three levels of confidence:

A confidence level of…
Means…
95% a high chance your planning horizon will cover the lifespans of people like you
75% a reasonable chance your planning horizon will cover the lifespans of people like you
50% a 50/50 chance your planning horizon will cover the lifespans of people like you

Interestingly, over half the Lifespan Calculator users selected a confidence level of 95% when asked this question.

ConfidenceThis is a helpful data point for superannuation fund trustees when developing their retirement income strategy to understand the level of confidence their members seek.

When she released the Retirement Income Covenant Exposure Draft, Senator Jane Hume, Minister for Superannuation, Financial Services and the Digital Economy, said trustees need to give retirees “the confidence to spend their superannuation savings”.

We invite all Australian superannuation funds to use the Lifespan Calculator to assess the preferences of their members and develop their retirement income strategy accordingly.

You can learn how to embed the Lifespan Calculator on your organisation’s website, or contact us for more information.

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Optimum Pensions was launched in 2017 with a single mission – to help Australians lead a comfortable retirement. The Optimum Pensions innovative retirement income solutions are specifically developed to address longevity risk and provide greater peace of mind for all retirees; no matter how long they live.

The Optimum Pensions, award-winning LifeSpan Calculator builds confidence around personal life expectancy and retirees’ possible retirement planning horizon.

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