Advisers find lifetime income boosts SMSF retirement security
Self-managed super funds (SMSFs) have long structured retirement income around bucketing strategies, separating short-term expenses from long-term growth investments. However, recent research indicates advisers may overlook a key component: guaranteed lifetime income solutions.
Accurium conducted actuarial modeling across more than 3,000 retirement scenarios to compare outcomes with and without lifetime income integrated into bucketing approaches. The findings demonstrate that combining these methods consistently improved both retirees’ confidence levels and estate planning results. This challenges the long-held belief that cash reserves alone can adequately protect against longevity risk.
Melanie Dunn, Accurium’s head of actuarial services, explained the study’s purpose was to evaluate whether adding lifetime income to traditional bucketing could strengthen retirement security. “The objective of the research was to assess whether retirement bucketing strategies incorporating a lifetime income solution could improve retirement outcomes for SMSF members when compared with more traditional retirement approaches,” she said.
Standard bucketing divides portfolios into cash reserves, defensive assets, and growth investments to prevent forced asset sales during market declines. Yet this approach does not guarantee income sustainability throughout retirement or address increasing life expectancies. The research examined four client profiles—individual retirees, pre-retirees, singles, and couples—across different portfolio allocations and retirement ages.
The results showed that strategies incorporating Allianz Retire+’s AGILE lifetime income solution produced superior outcomes across all categories. Average improvements in retirement confidence ranged from 6.7 percentage points to 13.8 percentage points, while average increases in projected estate values ranged from 33.7% to 77%, depending on the client profile. Notably, the improvements in income sustainability corresponded with stronger estate outcomes.
Lifetime income cuts market downturn risks
A key advantage was reduced pressure on growth assets during market downturns. Portfolios with lifetime income solutions sold fewer assets to fund spending, thereby preserving more capital for future appreciation. Catherine van der Veen, Allianz Retire+’s chief distribution and marketing officer, highlighted this as particularly relevant given today’s market conditions, where volatility and raised equity valuations challenge traditional assumptions.
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“Most SMSF retirees don’t suffer from a lack of investments. They suffer from a lack of income certainty,” she said. “Keeping more cash isn’t always the answer. The challenge is how to create confidence without sacrificing the growth needed to fund a retirement that could last 30 years or more.”
Couples, who face the longest retirement periods, experienced the most substantial benefits. In some scenarios, projected retirement confidence increased by nearly 20 percentage points, while estate outcomes more than doubled compared with baseline strategies. Researchers also found the benefits were often more pronounced among more conservatively invested retirees, challenging the perception that lifetime income solutions are only relevant for clients with fewer assets.
Advisers urged to rethink retirement strategy design
For financial advisers, the findings suggest a fundamental shift in retirement strategy design. Rather than treating growth, income generation, liquidity needs, and estate planning as competing priorities, assets could be allocated to distinct purposes, cash reserves, income generation, lifetime income guarantees, and growth investments, each serving a specific role.
The research shows a broader industry trend where advisers must address more than investment returns. SMSF members now demand answers to three fundamental questions: Do I have sufficient funds? What spending level is sustainable? What will remain for my family? These questions require full retirement income planning, not merely portfolio management.
Money Management, in collaboration with Allianz Retire+, hosted a webinar demonstrating how lifetime income solutions could integrate with existing bucketing frameworks. The presentations showed retirees with higher growth allocations still benefited, as lifetime income freed up other assets for compounding while providing stable payments.
