Annuity uptake still at slow burn stage


By James Dunn

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Australian investors understand they are living longer and that markets are increasingly volatile, but the logical outcome – products that can guarantee income for life – is a “penny that is yet to drop,” according to MLC general manager of retirement solutions Andrew Barnett.

Guaranteed income products included variable annuities, lifetime annuities and the newer self annuitisation products with pooling, such as Mercer’s Lifetime Plus.

But he said these only had 2 per cent of the market, indicating a massive “lack of awareness”.

This poor annuity product take-up could be set to change though. Barnett was speaking in the wake of the release of the MLC Investment Trends Retirement Income Report, which showed that Australian investors would be prepared to amend their investing behaviour to protect against longevity risk.

Both accumulator and pre-retiree investors would choose to invest on average at least 55 per cent of their super savings in a longevity protection product, the research found.

The report, which drew on a national survey of 8300 Australians aged over 40, indicated that accumulators and pre-retirees intended to transfer 44 per cent of their retirement savings into a retirement income product, of which 55 per cent would be potentially protected.

Earlier MLC research found that 51 per cent of people in the accumulation phase expected to outlive their savings.

“We’ve known for some time now that longevity risk is a real concern for retirees or those thinking about retirement,” Barnett said.

“Australians understand that they are living longer and they need to make their money last as long as they live.”

While the stated preparedness to invest more than half of their savings in a longevity protection product “might seem a little high to some,” Barnett argued that it was “not that surprising, when you consider the need of many retirees to protect the money they’re relying on to live a comfortable retirement”.

The report also showed that 18 per cent of accumulators and pre-retirees cited guaranteed income for life as the single most important feature they wanted in a retirement product.

“Fortunately, for many, there are now products available which have many of the features retirees are looking for, including guaranteed income for life, while providing flexibility to access capital when required.”

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