After what feels like an eternity, things are finally starting to heat up in the retirement space in superannuation. Funds have set up specialist "Retirement" teams, insurers are developing and backing new retirement income products, and the regulators' hands-on approach to the Retirement Income Covenant appears to be bearing fruit, in the form of more effective retirement income strategies.
There is an elephant in the room, however. Everyone acknowledges that retirement is personal, and "no two retirees are the same". We also need to accept the reality that many new lifetime income products are hitting the market with features that are not immediately comparable, not with other lifetime income products, and indeed not with the trusted old account-based pension. So how then can we help guide retirees into a recommended solution, that may include a combination of products, as well as some Age Pension entitlement?
Over the coming weeks, I'll be sharing snippets of our framework that shows how we might go about comparing retirement solutions, using an approach that straddles a careful balance between simplicity and the necessary mathematical rigour, and one that is founded in the guiding principles of the Retirement Income Covenant, with a view to helping trustees objectively demonstrate the delivery of member outcomes.
First, we'll be introducing the framework, and then we'll look at how it can be used to assess retirement solutions and link these to retiree preferences. In doing this, we'll explore how it might be used as an effective product distribution tool, member outcome assessment tool, and a way to help illicit preferences from members. We'll also see how it can be used by trustees to test the coverage of their product suites for different sub-classes of members.
Stay tuned!