In July 2009, A Treasury Capital Index Bond was issued with a real yield of 3.10%. Ten years later, in July 2019 the yield is a miserly 0.23%. The same has happened to normal term deposit rates. Things are really tough for retirees living off cash-linked income. Why can’t we as a society do more to help our senior citizens? Centrelink charge 5.25% compounding fortnightly on Pension Loan Scheme outstanding balances. If inflation is 2%, that is 3% real. It could be funded by term deposits from retirees. I would be interested in any papers about economic distortions. This may be introduced. Maybe it is worth it in order to look after our senior citizens.
We also don’t recognize that not all retirees think in an analytical manner like financial planners and actuaries. Many of the people we deal with are pragmatic thinkers rather than analytical thinkers. They look to the immediate payoff rather than the long term grand plan. These people are swayed more by their next planned overseas holiday than sustainable income.
Another group are idealists. Their actions will be governed more by how their work should be rather than what is a cold analytical plan. I find this group hard to knock. They are likely to be spending resources on helping children rather than their own long term plan.
Then there are the argumentative thinkers. They are either aggrieved or think they know better.
The fifth group of thinkers I like are realists. These are great people who will rise to the challenge and get on with implementing the solution you suggest. They work on what they sense about you rather than with the charts and maths.
I think we can make better tools to help engage the various types of thinkers. We need to show rebalancing retirement plans by way of an application that allows you to “play a movie” to the client. Rather than messy scenario generators, just good, expected and poor scenarios would probably suffice.
In the meantime, NetActuary is enjoying working on legacy pension actuarial reports and fixups (reserve allocation/terms running out). At $220 inclusive of GST we are about half the going rate – but the area is still profitable!
Brian Bendzulla
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