Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 485

Engaging retirees on the journey to manage retirement risks

At the recent AFR Super & Wealth Summit, the Assistant Treasurer and Minister for Financial Services used his opening address to say how important it was that superannuation had a defined objective, similar to other initiatives such as Medicare. “We can’t get everything settled for the long term unless we have an understanding of what we are trying to do”, he said.

Following the opening address, a number of speakers during the Summit suggested that the objective for superannuation should reference the following three items – retirement income, all Australians and dignity. For example:

“To provide income in retirement that helps all Australians to live with dignity, by supplementing or substituting the Age Pension.”

It is interesting, this is entirely consistent with the sole purpose test and the guidance provided in Superannuation Circular No. III.A.4 issued by APRA in February 2001. In particular, section 3 of that Circular states that:

“The sole purpose requirements contained in section 62 of SIS (the “sole purpose test”) limit the provision of superannuation benefits by regulated superannuation funds to a range of prescribed or approved retirement or retirement related circumstances. The test is the legislative expression of the retirement income objective which is the key rationale for superannuation savings.”

One thing is clear: retirement has become a central part of the conversation about the future of superannuation and member needs. Over the next 20 years we will have more post-retirement members with more superannuation savings than ever before. There are just over 3 million Australians currently aged 55-64 and approaching retirement in the next decade. In 2021, around 65% of retirees had less than $250,000 in super ‘at retirement’ but this is expected to quickly reduce to about 30% over the next 10 years. By 2031, almost 50% of retirees will have more than $500,000 in super.

Research has shown that superannuation fund members start to engage more with their super when they reach age 50 and/or their account balance reaches $250,000 (even more so when it reaches $500,000). So, the time has come, with demographics turning in our favour, to engage more people with their retirement.

To help, there have been two very important developments with effect from 1 July 2022.

First, the Retirement Income Covenant (RIC) came into effect on 1 July, which requires every superannuation fund to have a retirement income strategy for the benefit of members who are retired or who are approaching retirement. The retirement income strategy must address how the trustee will assist those beneficiaries to achieve and balance the following three retirement objectives:

  • Maximise expected retirement income
  • Managing expected risks to the sustainability and stability of expected retirement income
  • Having flexible access to expected funds during retirement

Trade-offs will need to be made to balance the competing objectives (for more information on the trade-offs).

As part of their retirement income strategies, superannuation funds are looking at different cohorts that might have similar objectives to potentially offer them different retirement product combinations, including an Account Based Pension (ABP), a longevity protection layer and of course the government Age Pension (for more information on cohorting).

Importantly, for retirees who are (or will become) eligible for at least a part Age Pension, there is a 40% exemption from the means tests for certain longevity protection products that can provide an immediate uplift in the Age Pension payments.

Second, new relief for superannuation calculators and retirement estimates set out in ASIC (Superannuation Calculators and Retirement Estimates) Instrument 2022/603 also took effect on 1 July 2022. However, ASIC has provided a transition period of six months, during which providers of superannuation forecasts may rely upon either the existing relief or the new relief. Only the new relief will be available from 1 January 2023. For more information on the new ASIC relief, we will shortly be publishing a separate blog, including details about the Flexible Interactive Retirement Estimate API that the team here at Deloitte has built to efficiently assist trustees who wish to better engage their members approaching retirement using retirement income estimates and calculators.

The new retirement estimates will provide a great start on the engagement journey for members who are approaching retirement, providing a much-needed wake-up call with meaningful insights about what retirement could look like. Once “awareness” has been raised, the superannuation fund will then be in a better position to provide further information about retirement, its risks and how to deal with them. As members get closer to retirement, more education materials and financial calculators can be used to help guide members to better outcomes. Ultimately, in some cases, members who are about to retire may seek some form of advice to help them to confirm their preferred retirement strategies and to implement them.

While that may sound simple, it’s obviously not. Retirement is complex and personal, and everyone’s personal circumstances are different. That’s why we have built a range of calculators and tools to assist members to understand how the various components of our retirement income system might interact. While it is tempting for product providers to think about how best to distribute their retirement product, we think that a better approach is to solve the retirement problem from a customer’s perspective – that is, we have a financial literacy problem, not a product scarcity problem.

How much superannuation do I expect to have at retirement? What my spending needs are likely to be, and what additional spending ‘wants’ would be nice? What product strategy is most likely to meet my needs and help me to manage my retirement risks? What drawdown strategy will meet my spending needs at various stages of retirement?

There is plenty of research to show that one of the scariest things about retirement is the fear of running out of money, but on the positive side, retirees are willing to use technology to help them plan for a better retirement.

Five customer insights will shape future offerings

That is where the next generation of retirement calculators come in. Calculators that clearly show variations in how long your money is expected to last under poor, average or strong market conditions. Those that allow you to compare outcomes under a variety of investment portfolios, from conservative to high growth. And are integrated with different longevity protection products to show not only how much Age Pension uplift you can expect, but also how different retirement products might be blended to produce different expected spending patterns during retirement. After all, this is what a retiree is most interested in.

 

Andrew Boal and Steve Freeborn are both Partners, Actuarial Consulting and Anthony Saliba is a Director, Actuarial Consulting at Deloitte Australia. This article is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance.

 

RELATED ARTICLES

How to give retirees the confidence to spend

Retirement spending: set the bar lower

Are lifetime income streams the answer or just the easy way out?

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

With markets near record highs, here's what you should do with your portfolio

Markets have weathered geopolitical turmoil, hitting near record highs. Investors face tough decisions on valuations, asset concentration, and strategic portfolio rebalancing for risk control and future returns.

Latest Updates

Taxation

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

7 key charts on the state of the Australian property market

The Australian property market stirs fierce debate - often bullish optimism versus crash predictions. But beyond the noise, seven charts reveal what's really driving prices and the outlook for residential real estate.

A simple alternative to the $3 million super tax

Division 296 aims to introduce improved fairness into the superannuation system, yet is overly complex. This scours the world for better ideas and suggests a simpler alternative which can achieve the same goals.

CBA and the index conundrum for super funds

After the hyperbolic rise in CBA shares, super funds are floating the idea of carving out the weightings of ASX bank securities and indexing them within their portfolios. This looks at why that might be a big error.

Strategy

10 policies to drive Australian productivity higher

Here's a comprehensive list of proposed reforms to fix Australia's stagnating economy, including introducing a flat income tax rate, reducing migration, and making childcare tax-deductible.

Interviews

Where to find big winners in Asia

As more money looks for a home outside the US, Asia may soon get some love. Fidelity's Anthony Srom outlines the best places in Asia to invest, including in Chinese consumer names, Indian financials, and Thailand.

Investment strategies

We have trouble understanding the time value of money

We overvalue the present and underestimate the future - it’s a cognitive glitch called hyperbolic discounting. It affects savings, spending, and loans, and it's more common - and costly - than we think. 

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.