Designing lifetime income stream options for members

These principles highlight the key requirements for delivering better member outcomes in retirement:

•             know your members

•             build a range of appropriate solutions

•             guide members to their best solution.

Delivering better outcomes requires a constant feed-back loop. It is not a sequential task list.

While building the right solution requires knowledge of the member base, it is also important to know how members will respond to various forms of guidance. This guidance could be in the form of education or advice provided through different channels.

Understanding how members think and behave can be just as important as understanding their balance and financial preferences.

One aspect of the provision of retirement income solutions that can be overlooked is that retirees make choices about their options. A good retirement solution is one that will help a retiree make a decision that is best for them and to make it at the appropriate time. People have their own biases, so it is incumbent on a solution provider to accommodate their preferences.

One of the challenges for managing superannuation in retirement is that during the accumulation phase the member does not need to interact with their superannuation.

Active members can make investment choices, or even manage their own superannuation fund, but that changes in retirement. Retirees need to make a choice with their retirement solution.

Variations in lifestyle and expectations mean that there needs to be a range of different solutions for retirees. Retirees also have more time available, and many want to actively engage in financial decisions, which they might not have done previously.

One key to a successful solution is simplicity. Retirees need to understand what their choices are and how these choices relate to their own goals in retirement. Solutions that aim to solve all the retirement income challenges but have complicated structures, fees and/or interactions have not been successful in Australia.