Supporting retirees in retirement income planning
This report was first published in May 2017. We republished the report in October 2017 after making minor revisions.
This study examined how people respond to a new income plan for retirement, known as a Comprehensive Income Product for Retirement (CIPR). A CIPR is a composite retirement income product which is intended to provide a balance of income, risk management (for example, longevity risk management) and flexibility to retirees. In response to a Financial System Inquiry1 recommendation, the Government has agreed to facilitate superannuation trustees pre-selecting a CIPR for their members at retirement. This study is a first step in building an evidence base to inform decisions about how best to present CIPRs to superannuation members in order to maximize comprehension, assist informed decision-making and alleviate cognitive load. Using insights from behavioural economics, we designed and tested a series of alternative presentations of information using a survey experiment based on a hypothetical CIPR.
Over 3,600 pre-retirement members across five industry and retail superannuation funds participated in the study. Members were asked to review information which compared a CIPR and an Account-Based Pension (ABP) (which is how most retirees currently manage their superannuation in retirement). Members were randomly assigned to view information about the two plans in one of eight conditions – minimal text descriptions (control); graphs showing estimates of income and assets over time; number tables showing numerical estimates of income and assets; text tables with text-based comparisons of income and assets; text tables with star ratings assigned to the plans and text-based comparisons of income and assets; and alternative versions of the text and number tables in which comparisons of income under each plan were highlighted in bold.