To stop retirees going mad, super funds must agree on these three things

Here’s a fun game to play in your last month of work. Log into your super fund and try to find the form to start your retirement income. Now guess what it’s called.

Is it a pension account? A retirement income stream? A “choice income” option? Flexi pension? Super income stream? Or something else that sounds suspiciously like a branding brainstorm that got out of hand?

Retirement is confusing – and that’s before you have to wade through piles of super fund jargon.Credit: Simon Letch

If you’re confused, congratulations. You’re really normal.

Super funds have spent the past two decades reminding us to save for retirement, making it easy and almost doing the job for us. But when we get to the business end of retirement, where we’re finally ready to spend our super, there’s suddenly a lot to figure out.

It’s at this point that they serve up a jargon soup which makes little sense to anyone outside the finance department, made more confusing because a lot of the terms cross over with language that is used to describe government payments.

Some funds call your retirement account a pension, but you associate the word pension with social security. Some call it an income stream, which makes more sense – if you’ve spoken to an adviser. If not, it’s just a new concept altogether.

What we need is a superannuation dictionary for retirement.

Others go with “income”, just to be vague. A few try to be cute and use all three, switching between “pension” and “income” and even adding in the wider term “account-based pension” just as you’ve finally worked out what the first one meant.

The only thing they seem to agree on is that none of them should use the same words as each other, or, helpfully, as the government.

Just to be clear: your account-based pension is not the same as the age pension, which is not the same as the transition-to-retirement income stream, or your retirement income stream, and none of those are what’s actually written on the form you’re now trying to fill out while muttering “just give me my bloody money”.

When you dig a little deeper, there are actually two problems – and they’ve both been highlighted in a new report shared with me by the Conexus Institute called Account-based pensions: Limited drawdown options, but no limits on terminology.

Yes, it’s written for the retirement industry. But I thought you’d appreciate the laugh – because let’s be honest, you’re the one who ends up copping the confusion. And I know from your cries for help that this stuff is real.

They pulled out the retirement income application forms for 20 of the biggest funds and analysed them. The first problem? There’s no common language. The second? Even when you figure out what they’re trying to say, the form still doesn’t let you do what the advice tool said you could.

And the third? Super funds tell you that you can take out more than the minimum, then their forms make it hard and confusing and look like the minimum amount is the sensible option.

From calculation to confusion

For most people, the road to retirement income really shouldn’t be this hard. Maybe you’ve just sat down with someone from your fund, or used one of their free online tools.

Either way, it all starts off looking pretty straightforward. They show you a gorgeous little graph, some shaded layers of income stacking up to give you a “comfortable” retirement.

The age pension is estimated for you down the bottom, your super income sits neatly on top, and if you’re lucky, there’s a cherry layer called “other income streams”. It’s basically a money layer cake.

This is where the fund helpfully suggests you draw a bit from your account-based pension (ABP) each year to top up the age pension. You nod. Seems reasonable. Looks easy. You can see the amount increasing over time. You can do this retirement thing!

A few days later, you click “Get Started” on the email that came from the advice session or the calculator. And that’s when it all goes sideways. You’re in a form that suddenly speaks a different language. Not the one used in the dashboard. Not the one used in the advice session. Definitely not plain English.

The whole system has been set up like a badly translated board game.Credit: Jessica Hromas

Most funds give you just two options: take the minimum amount the government says you must draw, or pick a fixed dollar amount to withdraw regularly. That’s it.

No third option that says “just do what the advice tool said”; no helpful button that says “top me up to hit my retirement income goal”.

There’s no explanation of how to calculate it. No reminder of the 6 per cent the adviser told you would work well for you and still see you with enough to fund your aged care later in life. No mention of how this ties back to your age pension.

Just two boxes – and good luck, because that’s your retirement income now.

Want to change it next year when your age pension shifts? Does that happen automatically? Do you need to update it manually? Should you call someone? Is this the bit where you book a second advice appointment? It’s all suddenly looking a bit hard. Hard enough to delay the whole thing.

Conexus says that only nine funds even let you increase the amount you draw each year in line with inflation – because apparently keeping up with the cost of living is optional now and completely in your hands to decide on.

And just three funds offer an automatic drawdown option that adjusts over time. So the “plan” you saw? You have to implement it yourself, one guess at a time.

You’d think that, by now, someone would’ve made this easy. A big “set-and-forget” button. Or at least a “we’ll do the maths for you” tool. But not yet – even with 4.2 million people in retirement and 5 million more on the way – this hasn’t been a priority.

And if you’re approaching retirement for the first time, you have to work this out while trying to remember whether your account is called an income stream, a pension account or a retirement smoothie.

It’s not you. It’s the system.

The more you look into it, the more you realise: it’s not your fault that you’re confused. The whole thing’s been set up like a badly translated board game.

Even the experts who study this stuff are saying: the options are limited, the naming is inconsistent, and it’s too hard for regular people to turn their savings into income.

So if you’ve opened a form, stared at the page, and thought “what am I reading?” ... you’re not alone. In fact, you’re the norm.

What we need is a superannuation dictionary for retirement. All the funds, all the government departments and all the advisers need to be locked in a room until they agree on three things:

• what to call retirement accounts,
• what the options to draw down actually mean, and
• how to make the form match the language used when you talk to someone about their plan.

Because right now, retirement income is being delivered like IKEA furniture – only the instructions are in five languages, none of them yours, and one of the legs is mislabelled. Real people shouldn’t have to decode jargon just to get their own money out.

If you’re now sitting there wondering whether you’re the only one who can’t make sense of the paperwork: you’re not. It’s difficult to navigate the retirement process in superannuation at present. Here’s hoping someone in a blazer in the financial regulator or superannuation industry association is listening.

Until then? Make yourself a cuppa and sit in the hold queue for their general advice line, again. Truly, don’t be afraid to ring your fund and say, “Can you please explain this in normal person language?” Tell them I sent you.

Bec Wilson is author of the bestseller How to Have an Epic Retirement and the newly released Prime Time: 27 Lessons for the New Midlife. She writes a weekly newsletter at epicretirement.net and hosts the Prime Time podcast.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making financial decisions.

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