CPD: Demystifying guaranteed lifetime income – what your clients need to know

Get better prepared for conversations with your Gen-X clients about the decumulation phase of retirement.

This year, the first of Gen X will turn 60. Over the coming decade, waves of Gen X Australians will join the baby boomers in enjoying a longer, healthier retirement than their parents and grandparents. Funding those years continues to be a source of concern for many as they approach this new phase of life.

Just in the last month, ASIC has once again criticised superannuation trustees for failing to effectively communicate with members about retirement. The regulator warned that many funds rely on generic, pre-retirement messaging and miss opportunities to provide meaningful support once members retire.

In its review, Report 818 – From superficial to super engaged, ASIC found a widespread lack of urgency in improving retirement communications, leaving many Australians without the information they need to make confident, informed decisions. With 1.5 million people already in retirement holding around $575 billion in super assets – and another 2.5 million expected to retire in the next decade – ASIC has urged trustees to prioritise more targeted, timely and member-focused communication strategies^[1].

When clients retire and their regular employment income ends, in an ideal world they should not have to worry about inflation, market volatility, or how long their savings will last. Nor should they face the fear of outliving their money and having to be reliant solely on the Age Pension to get by.

While super funds may provide foundational communication regarding retirement savings, the complexity and personalisation required during the decumulation phase demand a more tailored approach. You’re positioned to know your client and understand their short, medium and longer-term financial and personal retirement objectives. Given that at 30 June 2025, approximately 25 percent of Australia’s $4.3 trillion superannuation pool were  held in self managed superannuation funds (SMSFs)^[2]., it’s likely that a proportion of your clients are trustees of their own fund and will need even more comprehensive guidance when members reach the pension phase.

‘New era’ retirement income products

The OECD’s biennial report on the pension systems across OECD and G20 countries tells us that Australia has the world’s fourth largest retirement system^[3].. The Reserve Bank of Australia notes that our superannuation system sits at about 150 % of GDP and that projections have put the ratio as high as 244 % of GDP by 2061^[4].

Despite the increasing size of super retirement balances, research consistently shows that money worries are a leading cause of anxiety for older Australians^[5].. The biggest fear expressed by retirees is running out of money; either because they outlive their savings or because it’s eroded by external factors such as market volatility or inflation, both of which have been painfully evident for several years.

When soon-to-be retirees are faced with traditional retirement income products, there are generally tough trade-offs to be made between income certainty and flexibility. Many of those traditional retirement products, based on life expectancy, left nothing for the estate for those who died earlier than expected, or for those who enjoyed longer lives, no income support.

New era retirement income products have addressed these issues. Research has consistently shown that FORO (the fear of running out) is a major concern, but longstanding concerns around complexity, cost, flexibility and growth potential of traditional retirement income products has led Australians to eschew the sector in droves. Failure to utilise retirement income product may result in retirees ‘self-insuring’, living a frugal life to ensure they don’t burn through their retirement savings.

There is a better way, and it is important that advisers (and yes, superannuation funds) highlight both the progress retirement income products have made and the important role they can play in a well-rounded retirement plan. It also highlights the need for clear information and education to help your clients understand and make the most of these products.

New era retirement income solutions – such as guaranteed lifetime income solutions – can provide your clients with greater confidence about their future. Lifetime income streams function as a form of insurance against the financial risks of outliving savings.

By allocating a portion of a client’s portfolio to a new era retirement income solution, particularly one where the amount of income payable is guaranteed, you can provide your clients with the peace of mind that comes from the knowledge that their budgeted essential expenses will be covered regardless of market conditions. Some of these retirement income solutions also provide flexibility that allows for partial or full withdrawals to manage unplanned expenses or a change in circumstances, which importantly, offers adaptability in retirement planning.

Being well-informed is the key to help your clients to overcome misconceptions and foster a deeper understanding of the benefits such products can offer. Let’s address the top five misconceptions.

Misconception: Guaranteed lifetime income products are exceedingly complex

Reality: Advancements in user experience have – and are continuing to – drive simplification

Driven by rapid technological innovation and a stronger focus on user-centric design, today’s retirement income products are evolving towards greater simplicity and accessibility. The era of deciphering dense financial jargon is fading. Instead, new era products embrace intuitive design that makes them easier to use and easier to explain to clients.

Traditional annuities have long been burdened by complexity, but new era solutions prioritise clarity and customer experience. With straightforward features and transparent structures, they eliminate much of the confusion that once left advisers and their clients uncertain.

A key advancement lies in how product features are communicated. Clear explanations, short instructional videos, as well as interactive tools and calculators help demonstrate potential income outcomes. These resources not only enhance your ability to illustrate benefits to your clients but also empower your clients to make more informed decisions about their retirement plans.

The perception that guaranteed lifetime income products are inherently complex is quickly becoming outdated. By placing simplicity and usability at the forefront, modern retirement income solutions are setting a new standard for an intuitive and accessible retirement planning experience.

Misconception: Guaranteed lifetime income products are expensive

Reality: Product innovation, cost efficient structures and economies of scale provide more attractive pricing

The costs of new era guaranteed lifetime income products have steadily declined in recent years, driven by continuous innovation and more efficient product structures. By harnessing advanced technology and sophisticated financial engineering, providers have created solutions that are not only more streamlined and reliable but also significantly more cost-effective to operate.

Digitalisation has been a key catalyst in this transformation. Through the use of technology across product design, delivery and management, providers are achieving economies of scale that were once out of reach.

From automated processes to digital distribution channels, every stage of the product lifecycle has been optimised to reduce overheads and enhance efficiency. As the retirement landscape evolves, your clients can look forward to more affordable and accessible ways to secure the certainty of a dependable lifetime income. 

Misconception: Guaranteed lifetime income products lack flexibility and accessibility

Reality: Traditional annuities may lack flexibility and accessibility; new era products do not

Complexity alone doesn’t explain the historically low take-up of annuities in Australia. Traditional products have also been held back by rigid structures, limited flexibility, high costs and the inability to access capital when needed.

New era lifetime income products have transformed this landscape. They address the shortcomings of traditional retirement income products by combining the certainty of lifetime income with the flexibility to access capital. This offers your clients a compelling balance of security and control.

Unlike traditional annuities, investors no longer face an “all or nothing” decision between guaranteed income and liquidity. These modern solutions provide a dependable income stream in retirement while preserving the ability to draw on capital to meet unexpected expenses.

Flexibility now extends well beyond basic withdrawals. Many products allow your clients to tailor their income streams; to adjust payment frequency, incorporate inflation protection, or customise other features to suit their individual circumstances.

By combining reliability with adaptability, new era retirement income products deliver a powerful solution for clients seeking financial confidence without compromising access to their assets.

Misconception: Guaranteed lifetime income products have limited growth potential

Reality: Retirement income planning should (and can) include growth potential and protection

Retirement planning isn’t only about securing a steady income. It’s also about achieving the right balance between growing assets and protecting against downside risks. As your clients approach retirement, they face the dual challenge of building sufficient wealth to support their lifestyle while guarding against the uncertainties that can erode their savings over time.

Traditionally, investors have relied on growth assets such as equities and managed funds to build their retirement nest egg. While these assets offer strong return potential, they also carry significant market volatility risk, which can pose risks during the drawdown phase and threaten the sustainability of retirement income. Most of your clients will be all too familiar with that in the current environment.

Recognising the need for greater balance, some new era retirement income products integrate growth potential with built-in downside protection. By combining elements of both, they offer your clients the opportunity to benefit from market gains while reducing or even eliminating exposure to downturns.

As part of a diversified portfolio, these products can help clients maintain purchasing power, mitigate the effects of inflation and enjoy a reliable income stream – all with reduced volatility.

Retirement income planning no longer needs to be a trade-off between growth and security. With innovative new era solutions, investors can pursue both and achieve long-term financial confidence without sacrificing protection.

Misconception: Clients aren’t asking for guaranteed lifetime income products

Reality: When presented to clients, or when the question is reframed to specify guaranteed lifetime income, clients do want the features offered

Many of your clients will have a sense of what they want or need from their retirement income solutions, even if they can’t always articulate the specific features or benefits they’re seeking. Clients also tend to have a very clear understanding of their concerns.

A 2025 retirement readiness survey^[6]. identified the three primary factors that impact Australians’ readiness to retire. They are, in order of concern:

1. Inflation
2. The economy
3. Health care expenses

Research has consistently found that Australians favour flexibility in the early years of retirement, balanced by greater security in later years. This aligns closely with the principles of the Retirement Income Covenant, which aims to:

• Maximise expected retirement income
• Manage risks to the sustainability and stability of that income
• Provide flexible access to funds throughout retirement

However, it seems that a gap remains between retirees’ desire for income certainty and the explicit demand from super funds and financial advisers for guaranteed lifetime income products to address that desire.

A range of behavioural factors influence how individuals approach the decumulation phase. Inertia can lead investors to maintain the status quo even when better options exist, while present bias can drive short-term decisions at the expense of long-term security.

Despite these behavioural hurdles, evidence consistently shows that familiarity breeds confidence: as investors, advisers and funds gain a better understanding of the benefits of guaranteed lifetime income, their interest and adoption rates increase.

The key takeout is simple: the better informed your clients are, the more open they will be to solutions that meet their needs, both now and in the future.

Retirement planning can be complex, but challenging outdated perceptions and utilising new era guaranteed lifetime income products can give clients confidence. These products provide a reliable, sustainable income stream to support their desired lifestyle throughout retirement.

New era guaranteed lifetime income products represent a significant opportunity in retirement planning. They combine simplicity, affordability, flexibility and growth potential in a single, comprehensive solution. Advances in technology, innovative product design and a focus on user experience have made these products more accessible and user-friendly than more traditional retirement income solutions.

Not all income is created equal; designing a retirement portfolio requires an understanding of spending hierarchies and income sources, as well as an understanding of structures and solutions to deliver retirement income. These new solutions directly address many of the core challenges of retirement planning. They offer guaranteed lifetime income while providing opportunities for capital growth and protection against market volatility and longevity risk. By balancing growth and security, your clients can build wealth for retirement while mitigating financial uncertainties.

As awareness grows, more Australians are likely to recognise the value of guaranteed lifetime income products as a central component of a robust retirement strategy. With the right strategies in place, you can empower your clients to navigate the complexities of retirement with confidence and clarity.

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Notes:
[1] https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2025-releases/25-235mr-asic-sends-clear-message-to-super-trustees-amid-glaring-retirement-communications-gaps/
[2] https://www.apra.gov.au/news-and-publications/apra-releases-superannuation-statistics-for-june-2025
[3] OECD Pensions at a Glance, 2023
[4] The Future Size of the Super Sector, RBA, December 2024
[5] R Dinham, ‘A close look at retiree fears and expectations’, Firstlinks, 3 February 2021
[6]  https://www.ssga.com/au/en_gb/institutional/insights/global-retirement-reality-report/bridging-the-confidence-gap-australia-snapshot

This material is issued by Allianz Australia Life Insurance Limited, ABN 27 076 033 782, AFSL 296559 (Allianz Retire+). Allianz Retire+ is a registered business name of Allianz Australia Life Insurance Limited. This information is current as at October 2025 unless otherwise specified and is for general information purposes only. It is not comprehensive or intended to give financial product advice. Any advice provided in this material does not take into account your objectives, financial situation or needs. Before acting on anything contained in this material, you should speak to your financial adviser and consider the appropriateness of the information received, having regard to your objectives, financial situation, and needs. No person should rely on the content of this material or act on the basis of anything stated in this material. Allianz Retire+ and its related entities, agents or employees do not accept any liability for any loss arising whether directly or indirectly from any use of this material.