When individuals reach retirement, they have to make complex financial decisions about how to manage their retirement savings so that they get the most income for the rest of their lives. Currently it is common for retirees to choose to receive their superannuation as an account-based pension: an accessible managed fund from which they can draw annual income in amounts they choose. Most retirees appear to be drawing from these accounts at or near the regulated minimum rates, presumably in order to manage longevity risk.
The Australian Government has accepted the Financial System Inquiry recommendation to facilitate trustees pre-selecting Comprehensive Income Products for Retirement (CIPRs) for their members. This is aimed to help guide members at retirement and improve outcomes for retirees, including through increased private retirement incomes, increased consumer choice and better protection against longevity and other risks.
This study aims to provide insights about whether consumers can understand a hypothetical new type of retirement income plan (an example of a potential CIPR) and make choices that fit with their preferences, testing various methods for presenting the key information about the plan.
An online experimental survey will be used to present a hypothetical ‘offer’ of a potential new retirement income plan to participants. Eligible participants will be aged 45 and above and still in the superannuation accumulation phase with either active or inactive accounts, with a wide range of superannuation balances. The trial approximates a “framed field experiment” in which subjects are drawn from the population of interest and complete a familiar task (review the offer of a new financial product) in a naturally-occurring context, but understand that in this instance they are completing the task as part of a research study.
Individuals who agree to participate in the study will be randomly assigned to view different textual and/or graphical explanations of a retirement income plan with comparisons between this plan and a standard account-based pension. The different treatments are design to test how people respond to the presentation of the same information in text form versus graphical and numerical forms, whether the addition of star ratings improves understanding, and the impact of a salience prompt aimed at emphasizing one dimension of the choice (average income). Subjects will then be asked to indicate, hypothetically, how willing they would be to accept such a plan if it were offered to them by their superannuation fund. They will also be asked a set of questions to measure understanding of the alternative plans and the trade-offs involved in making a choice between them, as well as an open-ended question asking members to explain their choice. The survey should take no more than 15 minutes to complete.