Lifetime income products are essential for ensuring financial security in retirement. However, the adoption of lifetime retirement income products remains low due to several key barriers. Addressing these issues requires a coordinated effort from the industry, financial planners, and policymakers. 

1. Education: The Most Critical Issue 

Many retirees and financial planners lack a deep understanding of lifetime income products. Without clear knowledge of their benefits and mechanics, potential buyers hesitate or resist their inclusion in retirement plans. The solution lies in expanding accessible educational resources. Online platforms, YouTube channels, and detailed publications can demystify these products, helping retirees and advisers make informed decisions. 

Lifetime annuities offer clear personal benefits, including: 

• Increased happiness—knowing there is a secure income for life. 

• Increased spending power—as retirees feel more confident using their money. 

• Better budgeting—since income is predictable. 

• Protection against scammers—who often prey on retirees worried about running out of money. 

Greater awareness of these benefits could help generate more demand for these products, which is currently low. 

2. The Cost and Complexity of Financial Advice 

A significant barrier is the regulatory burden on financial advisers when providing advice on lifetime income products. A potential solution is an intra-fund advice model that focuses specifically on the form of the benefit rather than broader financial planning. This would help reduce the cost barrier and make advice more accessible. 

3. A Comparison Service for Advisers

Advisers need a clear and reliable way to compare different lifetime income products. A comprehensive comparison service would help them understand key product features, enabling them to make better-informed recommendations to clients. This would improve transparency and build trust in the advice process. 

4. Default Allocations for Lifetime Income 

Incorporating a minimum percentage allocation of superannuation benefits into lifetime income products could ensure broader adoption. With modern computing systems, implementing such a requirement is administratively feasible without imposing minimum dollar amounts. This approach is particularly valuable for lower-income retirees, who benefit most from a secure income stream while remaining flexible for higher-net-worth individuals. Read our article Redesigning Retirement: The Case for Soft Defaults to learn more.

5. Enhanced Annuities for Health-Compromised Retirees 

By age 65, the average retiree has at least one medical condition, increasing to two by age 70. Around 30% of retirees could qualify for enhanced annuities that offer higher annual payments based on reduced life expectancy. Expanding these options would provide fairer outcomes for retirees with shorter-than-average lifespans. 

6. Product Design 

Different retirees have different income needs. While CPI-indexed annuities protect against inflation, investment-linked options often provide superior long-term returns. These products require minimal shareholder capital support and offer flexibility to adjust payments through strategic investment choices. A diverse range of well-designed products can ensure retirees have suitable options to meet their financial needs. Read our article What is an investment-linked annuity? to learn more.

7. Role of Government and Industry 

While private sector competition has proven effective in driving down costs and fostering innovation, regulatory hurdles remain. Rather than direct government provision of annuities, efforts should focus on removing market inefficiencies, improving consumer protections, and ensuring better guidance for retirees. Strengthening the framework for private providers will enhance the availability and affordability of lifetime income solutions. 

The Path Forward 

Successfully addressing these barriers requires a coordinated effort from product providers, financial advisers, superannuation funds, and regulators. By systematically tackling these challenges, the industry can better serve retirees and provide long-term financial security. 

Now is the time for action. As Australia’s retirement system matures, lifetime income products must become a core element of retirement planning—ensuring that superannuation delivers on its promise of a secure, comfortable retirement for all Australians.