Why Lifetime Income Still Isn’t Scaling

The retirement income landscape in Australia is undergoing a transformation. With the Retirement Income Covenant mandating that superannuation trustees address longevity risk, lifetime income products should be gaining significant traction. However, despite regulatory momentum, member needs and growing industry expertise, adoption remains low. 

New research commissioned by the Orford Foundation, sponsored by the Blueprint Institute and conducted by Behavioural Finance Australia reveals that some of the barriers aren’t what you might expect. The obstacles aren’t primarily about product design, pricing or even consumer reluctance. Instead, three surprising behavioural barriers are quietly undermining even the most well-intentioned implementation efforts. 

Behavioural Barriers, Not Product Flaws

Barrier 1: Complexity Kills Decisions 

When Too Many Options Lead to No Action

The first barrier is perhaps the most counterintuitive: in attempting to address every possible member concern, the industry has created products so complex that they’ve become nearly impossible to understand and compare. 

Current lifetime income products typically offer numerous options. Members must navigate decisions about lump sum death benefits versus higher income, immediate income versus future growth potential, various bonus payments, adjustment mechanisms and cap-and-floor arrangements. Each product is different, making comparisons extraordinarily difficult. 

The research reveals that when faced with this complexity, members don’t carefully weigh all options and make optimal decisions. Instead, they do what behavioural science predicts: they do nothing, stick with what they know or default to account-based pensions. 

“People are ‘cognitive misers’,” explains the report. “They attempt to conserve their finite mental energy. When faced with complex problems, they seek mental shortcuts.” Currently, those shortcuts don’t favour the adoption of lifetime income products. 

The solution isn’t more education or better explanations. It’s radical simplification. 

Superannuation funds that have made the most progress are those embedding lifetime income into lifecycle products with clear, portfolio-level rules and using soft defaults that subtly guide decisions whilst still requiring member confirmation. 

Barrier 2: Calculators Without Conclusions  

Information Isn’t the Same as Guidance

The second surprising barrier is that the tools designed to help members make decisions are largely ineffective. 

Most superannuation funds and annuity providers offer calculators to help members understand lifetime income products. On the surface, this seems helpful. The research found, however, that these calculators fail at their core purpose: helping people make decisions. 

The fundamental problem? These tools don’t make it easy to compare scenarios, iterate towards a preferred solution or know when to proceed with confidence. They provide information but not guidance. They generate numbers but not conclusions. 

A member might see projections showing different income levels under various scenarios, but they’re left asking: “Which option is right for me? How much should I allocate? What features should I choose?” The calculator answers none of these questions. 

Some funds have begun addressing this through “smart soft defaults” or “presets” tailored to different member cohorts, embedding suggested allocations or drawdown rates in case study examples and calculator outputs. These subtle cues provide the decision support that pure information cannot. 

Superannuation funds should offer decision-support tools that actively guide members towards decisions, rather than simply presenting more data. This might mean fewer options, clearer comparisons and explicit guidance on suitable allocations for different member profiles. 

Barrier 3: Adviser Economics Don’t Stack Up 

The Advice Gap for the ‘Middle Majority’

The third barrier represents a structural challenge that many in the industry haven’t fully recognised: the financial advice channel isn’t economically aligned with lifetime income adoption for the very members who need it most. 

The research examined financial advisers who have engaged with lifetime income products and found a consistent pattern. Most are small, generalist businesses, not specialists in retirement income advice. For these practices, providing comprehensive retirement income advice including lifetime income analysis often isn’t profitable. 

The members who would benefit most from lifetime income products—those with moderate wealth, typically between $250,000 and $750,000 in retirement savings—are often unwilling or unable to pay advice fees sufficient to make detailed retirement income planning economically viable for advisers. 

The challenge for annuity providers is that they have invested heavily in supporting advisers through business development managers, training, tools, and platform integrations, yet the economic fundamentals limit the pathway to scale. 

An alternative approach suggested by the research is to develop scalable decision support through digital tools, general advice services, and phone-based guidance. This isn’t about replacing personal advice for those who value and can afford it. It’s about creating viable pathways for the larger cohort of members who currently fall through the gaps. 

What Super Funds Should Do Next 

These three barriers are making the adoption of lifetime income difficult when it should be easy. 

The highest-priority recommendations from the research focus on reducing decision-making burden whilst preserving member choice. This includes integrating lifetime income into lifecycle and default retirement products, increasing use of soft defaults (especially cohort-specific “smart soft defaults”), and adding accumulation features that build motivation for lifetime income adoption during the pre-retirement years. 

Medium-priority recommendations address the decision-support gap through better guidance in tools and calculators, removal of application process frictions and development of alternative advice and guidance models based largely on general advice. 

The broader implication? The lifetime income challenge isn’t primarily a product design problem or a consumer education problem. It’s a behavioural design problem. Superannuation funds that recognise this, and design their retirement solutions accordingly, will be best positioned to meet both their Retirement Income Covenant obligations and their members’ genuine needs. 

Make Lifetime Income the Easy Choice 

The research makes it clear that Australian retirees will have more secure retirement outcomes when lifetime income becomes the easy choice, not the complex exception. 

Access the Full Research

The complete Behavioural Finance Review report, “Redesigning Australia’s Retirement System Through Increasing Take Up of Lifetime Incomes,” is now available through the Orford Foundation. The report includes detailed analysis of current superannuation fund practices, comprehensive recommendations for implementation, and frameworks for assessing communication effectiveness. 

About the Research

This research was commissioned by the Orford Foundation in conjunction with the Blueprint Institute and conducted by Simon Russell from Behavioural Finance Australia. It builds on previous Orford Foundation research, including focus groups, one-on-one interviews, and laboratory experiments examining retirement income decision-making. 

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