Australia trailed behind the rest of the developed markets in offering retirement product solutions to retiring and retired members despite leading the front in solving the retirement adequacy issue.
Such was the opinion of Tria Investment Partners, which said Australian manufacturers did not provide many options for a retiree to buy a lifetime (i.e. guaranteed) income stream.
The wealth and asset management consultancy firm’s partner, Oliver Hesketh, said that progress had stagnated on how Australia dealt with members’ longevity risk.
“Acceptance of product solutions remains very low amongst independent retirement-focused planners,” Hesketh said.
“Tria’s recent study of the independent wealth market showed just 10 per cent of those advisers use any type of annuity as a core part of their solution.”
Take up of variable annuities was even lower, with less than $2 billion of total assets invested.
The biggest hurdle was the persistent uncertainty on retirement policy, especially the path of change on deferred annuities.
The deferred lifetime income option fits well with adviser models and helps address the longevity-over-adequacy problem.
Advisers agreed the biggest risk was members outliving their savings despite having a good balance, and this risk superseded adequacy.
Another problem was the excessive focus on price instead of value.
There was also growing consensus that members pooling risk together was a “win-win” for customers.
“It will be incumbent on product manufacturers to educate advisers on the value being offered by these products, allowing a conversation with members to more accurately weigh the benefits and the costs of longevity protection,” Hesketh said.
