2 CPD Points
Summit 2025: Improving Longevity Literacy to Motivate Interest in Lifetime Income Products
Background In 2024 we fielded an online survey to a representative sample of 1,200 Australians aged 50-75 to elicit self-assessed membership of decision states for the purchase of lifetime income products. Our premise is that people move through a series of decision states - specifically from unaware, to aware, to interested, to capable - before they are in a position to make a decision about whether to choose a lifetime income product. We found that only 27% of our sample were aware, interested and capable of making a decision to choose a lifetime income product. Barriers to ‘awareness’ included a failure to plan for retirement and poor financial literacy, while ‘interest’ in longevity products was inhibited by misperceptions of the characteristics of lifetime income products compared with account-based pensions and poor longevity literacy (in terms of pessimism or confusion around subjective life expectancy and/or survival probabilities). The 27% of our sample who stated that they were capable and ready to make a decision had both good understanding of retirement product characteristics and longevity literacy. New research In this new research we focus on the role of longevity literacy as a means to motivate ‘interest’ in lifetime income products. Data collected in our 2024 study shows that, on average, people underestimate their life expectancy and survival probabilities, confirming previous research. It is therefore not surprising that those entering retirement are not ‘interested’ in a retirement income product that ensures a regular income for life, however long that life may be. Our aim is to identify information treatments which will enhance awareness and understanding (of the implications) of longevity – i.e., to improve longevity literacy. We conduct an online experimental survey to a representative sample of 1,400 Australians aged 50-75 to elicit ‘interest’ in lifetime income products. Survey participants are randomly assigning to seven treatment groups, each with different information scenarios designed to motivate ‘interest’ in finding out more about lifetime income products. The information treatments include one or more of the following: • Standard survey questions to elicit subjective life expectancy and subjective survival probabilities. • Life expectancy for a person the same age/gender from the Australian Life Tables (ALT). • Personalised life expectancy (modified from ALT using responses to survey questions on personal characteristics and behaviour). • Financial consequence information, which explains the financial implications of living long. Page 2 We also include a control group which receives no information. The experimental survey concludes with the collection of data on demographics, economic preferences, financial literacy and numeracy and other relevant covariates. This experimental set up will enable us to compare the effectiveness of alternative information formats to motivate ‘interest’ in learning more about lifetime income products. Our findings will inform communication strategies on longevity and lifetime income products for both public policy and industry practice. The survey will be fielded in Q4, 2024, with a draft paper summarising key results to be completed in early 2025. Alignment with the theme of the All Actuaries Summit 2025 This research and proposed presentation is closely aligned with the conference theme - ‘New Age: New Actuary’. Traditional actuarial research would assume that retirees are aware, interested and capable of choosing complex retirement products and would focus on product design. This research draws on insights from marketing, and experimental and behavioural economics as complements to sound actuarial knowledge, thus illustrating how the ‘new actuary’ with a multidisciplinary focus has the potential for greater societal impact.
Hazel Bateman
13 June 2025
