The Australian Government has built what it calls the MoneySmart Retirement Planner which is a dashboard tool. You plug in your savings in “Super” and tell the planner a little about yourself (and your partner) and within five minutes you are able to see your retirement situation
The user experience is great; everything I want to know is available quickly and simply. I don’t need to find lost pensions, as the Australian system rolls everything into one. I don’t need to worry about all my other savings because the Australians are clear about what’s retirement income and what’s a capital reserve. All I am focused on is saving enough to stop work and enjoy a decent lifestyle for myself and my partner.
But – and this is even better, there are options , for those who want to use them, to go further.
These projections show “account based” pensions – where the money runs out if you don’t hit investment targets. The calculator allows you to look at guaranteeing your income lasts as long as you do.
One of my Aussie friends wrote me
The government’s MoneySmart Retirement Planner tells me I can spent $65,707 per annum when I retire. But buried in the advanced section is an assumption that I’ll totally exhaust all my savings at age 90. I’m not happy with that assumption (and my wife is younger than me too) so I changed it to 99 to be more prudent. It then tells me I can only spend $56,177 per annum.
Ouch! That is a BIG difference and shows what a nasty impact longevity risk has on superannuation member outcomes.
Funnily enough , the Australians are no greater fans of annuities than we are . like us they want the return of an equity based draw down plan with the certainty they’d expect from a defined benefit pension promise and there’s a fierce debate about how you measure financial security in retirement
For people who want to know more about financial security , there are new options coming to the market which are neither draw down or annuity
For my friend who wants his pension paid through his and his partner’s 9th decade and beyond, some Australian Super plans are building the equivalent of scheme pensions that provide the protection against living too long from within the fund
Making Super more ambitious in providing greater security in retirement
So what can we learn from Australian innovation?
- A really simple Government modeler is an effective way of establishing trust
- That modeler can and is being used to think beyond account based pensions (drawdown).
- That innovation is happening in the private sector , with the Government’s modeler as the rock on which innovation is built
And all this is built around simple messaging. about keeping the idea of a pension distinct from savings and by focusing on pensions as the way to stop work when you get to the age.
The more you move into the back end of the modeller, the more you can find out about the impact of costs and charges, taking career breaks and of living longer than you expect.
But by putting the simple stuff at the front and not getting bogged down with health and wealth warnings, the Australian Government is teaching us a lesson.
Can MaPS replicate?
We need in the UK , a retirement planner that gets to the point as the Australian Government’s does
We need it now, not when the dashboard is delivered.
MaPS has the resources to do this and now is the time for it to deliver.
And if we have this dashboard, we will be able to move forward, as the Australian retirement industry is doing, and innovate.
We need this rock!