Retirement sector must find more compelling ways to engage older Australians.
With many of us now expected to live well into our 80s, retirement is becoming a longer and more meaningful phase of life. Along with life expectancy, the proportion of Australians reaching retirement age is also growing. In 1911, when the ‘old-age’ pension was first introduced, less than 5 per cent of the population was older than 65. Today that figure is more like 16 per cent.
Given the pressure this potentially places on the Australian budget, successive governments over the past 30 years have made it clear that citizens need to take steps to save and plan for their retirement.
In this context, it's crucial that those working in the sector comprehensively investigate how confident Australians feel about retirement, and find new and more compelling ways to engage citizens in conversations about a subject that can be perceived as dry or difficult.
To date, most of the measurements of retirement confidence have been restricted to economic analyses that focus on factors beyond a person’s control and cannot be changed in the short-term, with most studies associating retirement confidence with having enough money to live comfortably.
But retirement confidence cannot be easily captured by a single indicator, with social, health and wellbeing factors, as well as the ability to plan, also key indicators.
Going forward with confidence
For the past four years, Monash University’s BehaviourWorks Australia and AustralianSuper have been collaborating on a study to more accurately paint a picture of how confident Australians feel about retirement, and better understand how financial, social, health and planning aspects come together to shape retirement confidence. Unlike other studies in this area, the Retirement Confidence Index (RCI) considers four key pillars:
- financial awareness and skills
- health and wellbeing
- social factors
- retirement awareness and planning.
Over four annual surveys, the RCI has captured the sentiments of more than 4000 Australians aged 50 years and over, focusing on these four key areas, meaning it can track changes in confidence on a yearly basis.
The average confidence score for Australians aged 50 and over is 65 out of 100. Retired Australians scored six points higher than those who are nearing retirement (68 vs 62). There were also gender differences, with men feeling more confident than women (67 vs 64). This trend has continued for the past four years of the study.
In terms of the key factors of the index, it found that financial literacy increases as people approach retirement. This suggests that pre-retirees are developing skills and knowledge to better manage their money.
The survey also found that financial anxiety reduces significantly during the retirement years, which contributes to higher retirement confidence among retirees.
Of the participants who have been taking part in the survey since 2017, those approaching retirement felt more impacted by COVID-19 than those who were retired. This year, people nearing retirement felt more uncertain about their future and are finding it difficult to visualise what they need in order to plan for retirement. This contributes to lower retirement confidence among this group.
However, the same group members had also increased their savings between 2019 and 2020, suggesting that the pandemic has led some pre-retirees to focus more on saving.
Many pre-retirees are also engaging more often with their superannuation fund providers, compared with previous years.
Although pre-retirees have been quick to respond, 19 per cent had to make changes to their retirement plans, including 12 per cent who have delayed retirement, and 7 per cent who are retiring earlier than planned.
Insights and interactivity
While previous reports were translated into written communications for AustralianSuper members, this year an interactive online tool was developed with dynamic and visual displays, where users could play with and filter the data.
AustralianSuper’s senior manager, CXP, and behavioural economist Dr Eraj Ghafoori said: “Reports are often technical, full of jargon and not always entirely relevant. An interactive representation, however, allows the users to pick and choose the insight of interest.”
Research has shown that visual displays and data storytelling can also increase audience attention. Through the tool, behaviour can be influenced by making it easier to understand complex insights in meaningful and personal ways. Also, data storytelling is considered more engaging and less threatening than statistical information.
Further, the interactivity creates an opportunity for intuitive exploration by enabling users to investigate a range of factors that can influence how confident they feel about retirement.
In such a way, it encourages users to think like a data scientist and ‘learn by doing’ as they test hypotheses about their retirement confidence.
Do you believe there is enough structured information available for pre-retirees? Should older Australians be assessing the lie of the retirement landscape much earlier than they traditionally do?
This article was co-authored with AustralianSuper behavioural economist Dr Eraj Ghafoori. It was originally published by Monash University in Lens.
Fernanda Mata has a PhD in Psychology from Monash University and is a research fellow for BehaviourWorks Australia, Monash Sustainable Development Institute (MSDI); Liam Smith is a leading authority on behaviour change and director of BehaviourWorks Australia, MSDI.
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