Demand for annuities is higher than previously thought but Australians are overwhelmed by choice, according to research.
Research from the Orford Initiative at Melbourne Business School found that as many people were primarily interested in annuities as they were in traditional drawdown options, such as account-based pensions.
Orford senior research fellow, Teagan Altschwager, said: “There’s a belief out there that Australians ‘hate’ annuities, which is a strong word but it’s the one that gets used.
“When we talked to financial advisers and people from super funds and government about annuities, most of them said they thought customers don’t like them or understand them, leading them to not purchase.
“Our research shows that is only partially true, in that customers do struggle to understand annuities, but there would likely be much greater demand if the options were presented in a simpler way.”
However, Altschwager said the study’s participants appeared to be overwhelmed by choice when it came to comparing annuity products.
“We asked people to compare two annuity products with a random selection of attributes, and then compare that choice to the option of managing their own retirement savings,” Altschwager said.
“There was a huge preference for people to avoid making a choice. You might expect some avoidance, but not to this extent. Basically, respondents were putting it in the ‘too hard’ basket and avoiding the decision altogether.
She noted that annuities were a viable option to allow Australians to think about how make their money last in retirement.
