According to TAL research, around 90 per cent of retirees who opted for a pension or lifetime income account were satisfied with their decision, compared to 66 per cent of those who withdrew all or most of their super as a lump sum.
The second edition of TAL’s What I Wish I Knew About Retirement report called this a “striking” discrepancy and attributed it, at least partially, to retirees’ uncertainty around how long their savings need to last.
“Even retirees with adequate savings default to caution at exactly the stage of life when they’re most able to enjoy it,” the report said.
While TAL conceded that some participants may have reported lower satisfaction with lump sum withdrawals for reasons unrelated to relative benefits of different retirement products – they might have, for example, needed the money to pay down debts – the gap was described as significant nonetheless.
The report continued: “The superannuation decision at retirement can be irreversible for many people. Unlike investment choices during accumulation, which can be adjusted over time, the choice of how to access super often locks in a pattern that’s difficult to change.
“Members who withdraw lump sums may not be able to put that money back into the concessionally taxed super environment, while those who leave money in accumulation may continue paying tax on earnings unnecessarily.”
Despite the research identifying high satisfaction levels with pension and lifetime income accounts, TAL found that awareness of these options was relatively poor. Among the pre-retiree cohort, nearly a third (31 per cent) said they didn’t know what their options were for accessing super; the same amount said they’d made no plans for retirement whatsoever.
“What’s missing is a pathway to awareness, understanding and action, supported by clear information about the options available and how they work as retirement actually unfolds,” the report said.
As to where pre-retirees are hoping to find this kind of information, the research found that there was an almost equal split between super funds (46 per cent) and financial advisers (45 per cent). It’s worth noting, however, that engagement with both options drops precipitously in retirement – only 30 per cent of retirees went to their super fund for guidance, and only 39 per cent maintained a relationship with their adviser.
Commenting on the research, TAL retirement and wealth general manager Shaun Bransdon said: “People care deeply about their financial futures and they’re paying attention – but we don’t see that in the actions they’re taking to plan for this critical life stage. Many feel they don’t have all the information they need.”
“Super funds are stepping into this opportunity, building on the trust developed with members over their working lives: 64 per cent of pre-retirees say they trust their fund to advise on retirement needs,” he added.
“Options like guided settings, information on how different retirement income options work together with the age pension, and tools that help them make decisions that suit their circumstances, could help more Australians approach retirement with confidence.”
