One of the great features of the Retirement Income Covenant is that it clearly acknowledges the inherent trade-off that exists between different objectives when planning for retirement. Consider the alternative: "Would you like to maximise your capital AND manage your risks AND have flexible access to funds?" Well, if asked that question, we can safely assume most people would answer "yes". However, with the Covenant, the obligation is on the trustee to help members achieve and BALANCE their different retirement objectives, knowing that some objectives will invariably compete with others.
So how can we communicate this concept to retirees? Introducing the Deloitte Retirement Trilemma (Assessment View). A visual assessment of any permissible retirement solution, being a combination of product building blocks and the Age Pension. The Retirement Trilemma quickly demonstrates how a given retirement solution performs against each of the three Retirement Income Covenant objectives. It considers both market risk and longevity risk, allowing trustees to assess different combinations of products for every member and target solutions accordingly – in a way that is directly aligned with the Covenant and simple to comprehend.
Please contact me if you would like to find out more about the Deloitte Retirement Trilemma, or are interested in using it for product development or incorporating it in one of your retirement calculators. Special thank you to Andrew Boal for the smooth narration below!