Majority want inflation-protected income

Some 87% of retirees want regular inflation-protection income, according to a survey from Mercer, and the Age Pension system isn’t currently built to support underwhelming retirement income plans.

Only 50% said they wanted a guarantee it would not run out, while 71% wanted the flexibility to change and 91% said they wanted to be able to leave any leftover retirement funds to loved ones.

Speaking on the Money Management Retirement Income Webinar, Emily Barlow, Mercer principal – senior investment consultant, said: “We did this survey a year or so ago when inflation wasn’t so much of a concern so it was interesting to see how many were concerned about it.

“We found risk tolerance was very low, there was only 6% that would tolerate more than a 10% loss in any one year.

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“The main aim is to provide a sustainable and adequate income, but a natural tension does exist between those two.

“Running a high income in the early years could result in someone running out later while a lower income might be sustainable, but isn’t going to last necessarily.”

Barlow said for individual savings, money clearly had to last longer as pension systems would struggle to support a greater population, something that would be an issue overseas too.

“It impacts things like Government pensions, particularly unfunded pensions like the Australian Aged Pension, because its not only going to have to last longer, it’s going to have to be spread to more people,” Barlow said.

“This puts into question the sustainability of many pension systems and countries take action by either increasing the eligibility age or reducing that entitlement.”