Edition: February/April 2018
Whose retirement is it anyway?
90% - the proportion of pensioners who, according to ASISA statistics, purchased a living annuity during 2015 with their retirement savings. 66% - the proportion of pensioners who, according to Liberty research, want a guaranteed income for life.
This last percentage increases if we include hybrid options which contain an element of guaranteed income for life. This paradox between the type of income pensioners say they want (i.e. the 66%) and what they actually invest in at retirement (i.e. the 90%) presents the question – Whose retirement is it anyway? Or, looking at it from a different angle, what are pensioners’ actual needs and wants?
At its core, pensioners’ needs and wants are the same across different income levels. It is the order of priority between the different needs that differs. Our internal research at Liberty Corporate found that pensioners’ needs and wants can broadly be grouped into two main categories: functional and emotional. This links strongly to the core of true and valued customer experience: ensuring customers (in this case pensioners) feel they are receiving value for money and feeling valued. In other words, it is about interaction and perception.
Interacting with the functional
Through personal interaction, we take pensioners through aspects such as perceived value, product and service availability, functionality and quality. Put differently, this is our delivery of the customer promise. Unsurprisingly, at a functional level, it is still a priority for pensioners to be able to cover basic living expenses like food, cleaning products and municipal services (e.g. water and electricity). The ability to afford medical aid cover is also important, but is one example of where there is a difference in order of priority between income levels. Another example is to be able to pay for their dependents’ education. Traditionally, annuity payments that increase with headline inflation have been deemed appropriate to maintain a pensioner’s standard of living, but, given the observed increases in pensioners’ specific cost of living, one does start to wonder whether a dedicated measure of “pensioner inflation” is perhaps not needed.
Accurately planning and budgeting is needed in order to appropriately manage pensioners’ underlying costs. This is a necessity for any age group, but is felt most acutely in the case of pensioners. The continued need for growth in knowledge and confidence in whatever annuity product and services are bought. During interviews with pensioners already in retirement, this need echoed through the stories they shared. Most pensioners regretted not asking enough questions and seeking financial advice about retirement planning and the annuity products available in the market. They understood the basics of an annuity product, but with hindsight, should have asked for more detail. For example, understanding the tax efficiency and implications of their choices are specific regrets that were mentioned.