Financial advisers must educate clients about retirement income solutions like annuities in a language they can understand as a study showed less than one in three had a good understanding of the benefits of annuities, CoreData research showed.
The 2016 Post-Retirement Report, which surveyed retirement attitudes and intentions among Australians aged 45 and older, found only 27.3 per cent of clients would consider buying annuities in retirement.
However, the research also found that while annuities were not well understood, there was a demand for some of the features offered in annuities, suggesting a need for education from financial advisers.
CoreData head of Western Australia, Kristen Turnbull, said: “Poor levels of knowledge and understanding are the more commonly cited barriers to take-up; however reluctance to relinquish control poses another key challenge for annuities providers, particularly at a time when cash rates are at record lows”.
“The two key things that pre-retirees want in managing their retirement savings are a guaranteed income stream and to meet their desired lifestyle, so annuities providers, funds and financial advisers need to find ways to talk to members about the income solutions available in retirement in a language that they understand,” she said.
The demand for digital engagement from super funds among is rising, with 54.8 per cent of pre and post-retirees saying they would like information made available on websites, while only 34.2 per cent want their funds to increase awareness through mailed out brochures, down from 41.1 per cent in 2015.
The research also found majority of retirees (53.1 per cent) did not expect to achieve their ideal retirement amid rising living costs and retirement income expectations, up from 39.5 per cent in 2015.
Pre-retirees expect to need an average of $1,224 a week, up from $1,124 in 2015 and a superannuation balance of $804,559 to achieve their desired lifestyle.
However, Turnbull said the average superannuation balance at retirement for men was $292,500 and $138,150 for women, well short of what pre-retirees expect they would need.
