Member-centric product design

Divergent views between retirees and advisers have driven innovation in retirement product design, according to Challenger chief executive of distribution, product and marketing, Paul Rogan.  

Addressing the Super Review Post-Retirement and Ageing Forum in Sydney this week, Rogan said the revival in annuities - along with the drivers of innovation in this market - were achieved through listening to retirees, whose views contrasted with those held by some in the industry. 

Capital preservation was of paramount importance to retirees,  according to a 2011 marketing pulse adviser study, with 36 per cent of retirees strongly agreeing with the statement that they were mainly concerned that the value of their original investment did not decline. This contrasted with only 9 percent of advisers in the study strongly agreeing to the same statement.  

This retiree risk aversion was further supported in research by National Seniors Australia last year, which found over 37 per cent of over-50s said they could not tolerate any losses. 

Rogan said new liquid lifetime annuities were a result of prioritising retirees’ wants and addressing the dislike for traditional annuities’ lack of capital access. He said new liquid lifetime annuities were designed to protect retirees against longevity, market and inflation risks. 

Rogan said dealer group and adviser education in retirement portfolio construction was crucial to acceptance of any new post-retirement product.  

The recently developed Mercer retirement income guidelines demonstrated the value of the income-layering concept , Rogan said.  

He said successful and sustainable retirement income products are a function of efficacy - that is, they are based on solving the retiree’s 'trilemma’ of balancing competing needs for income, capital access and longevity protection.