The study revealed that retirement income preferences are highly individualised and indicated that readily available data (currently held by a super fund) may misguide super funds and government when cohorting members for the purpose of setting retirement income strategy and fit-for-purpose assistance.

Home ownership and ownership of a guaranteed lifetime income product (GLI) were the top two contributing factors associated with a greater sense of retirement preparedness. Yet for those under the age of 65, two thirds reported they had ‘no knowledge’ of guaranteed lifetime income products and only 8% of the 55 and older group claimed to be knowledgeable.

Using revealed preferences methodology, it is estimated that over $145 billion of 55–74 year-old peoples’ superannuation  should be transferred into a GLI to meet their preferences for long-term income certainty. 

Shachar Kariv, Co-Founder and Chief Scientist, Capital Preferences explained how its ‘revealed preferences’ methodology, which combines interactive gamified decision scenarios and decision science, can model an individual’s retirement income certainty preferences.

“Every member is unique, and the technology to serve them now exists. Our findings highlight the importance of recovering individual preferences as part of the member experience. Simply relying on demographic data to predict income certainty preferences will almost certainly misdiagnose members – and hinder superfunds in providing fit-for-purpose retirement income assistance,” Professor Kariv said. 

“Digital and scientific innovation can play a significant role in solving this potential issue, allowing super funds to recover essential information on their members. Measuring our study respondents’ retirement income certainty took just minutes to complete via their mobile device.”

“Members can’t self-report their preferences in areas of risk, but they can show us with their decision making,” he said.

Mandy Mannix, Chief Executive, Customer for Challenger, Australia’s largest provider of annuities, supports the take up of highly personalised yet simple and scalable solutions that would help super funds support their members to make better informed decisions about their desired retirement income. 
 
“Data reinforces the importance of financial security in retirement – as Australians are living longer and retiring in record numbers, it’s critical that as an industry we understand and respond to retirees preferences to ensure they have confidence to spend.”

“It’s exciting to see momentum building in digital innovations and the meaningful role they can play to support super funds, advisors and Government in solving the retirement income puzzle.” 

“Government and industry have a critical role to play, working together to increase financial literacy through guidance and education to ensure Australians make the most of their superannuation throughout their lives,” Ms Mannix added.

¹ Current super balances for age groups sourced from Quarterly Superannuation Industry publication | APRA