Changing Landscape of Retirement #10 – Jeremy Cooper – Transcript

SUMMARY KEYWORDS

people, retirement, age pension, superannuation, spending, retirees, talking, working, advisors, life expectancies, thought, conversation, clients, average, bit, podcasts, world, effectively, life, retirement income

SPEAKERS

Fraser Jack, Jeremy Cooper

Fraser Jack 

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Fraser Jack 

Welcome back to the x y advisor podcast. I’m Fraser Jack and we are wrapping up today the series on the changing landscape of retirement I am joined by somebody who properly needs no introduction when it comes to conversations around superannuation. Jeremy Cooper, welcome

Jeremy Cooper 

one advisor.

Fraser Jack 

Now for those x y listeners who may not be familiar with with you even I’ve said you need no introduction. Do you want to give us a quick overview of you and your history in what’s what is probably peeling legendary history around the Australian superannuation system?

Jeremy Cooper 

Sure, Fraser, I’ll be as quick as I can be on this one. So interestingly, I started by career as a lawyer. So I can say that I spent two decades as an advisor, you know, advising that different sorts of things, but using the same tools, I suppose. And then I saw something more interesting to do, I think and I ended up being the deputy chairman of asik. For five years, that was in the mid 2000s. I spent a lot of time working on what I call retail financial advice issues. When my statutory term in the then Rudd government asked me to chair a sort of holistic and first time review of the superannuation system, concentrating specifically on things like efficiency and governance and structure. And I spent had the privilege of spending 12 months doing that. That report was tabled in mid 2010. And then over the last 10 years, I’ve been working in research and thought leadership and policy role of challenger. And I guess they’re my credentials for having this chat with you. Yeah, fantastic.

Fraser Jack 

I think recruiting credential wise, the changing landscape of retirement, certainly started with, you know, things like the Cooper review back in 2015. So, so the the changing change the changing started a while ago, obviously, everyone’s going through a lot of change. And so we’ve got plenty, plenty to chat about. And, of course, this is the last podcast in the series. So we’re going to sort of bit of do a bit of a recap of some of the thought leadership that came out of the series itself. All sorts of different things came out of it, which has been fantastic. And so we can talk about all those sorts of things. And we can add in all Europeans Of course, as well around what you think sort of some of the fears and you changing some change some some ideas around what sort of concerns retirees might have as they move through this period of their life. So thank you for joining me today. Now let’s let’s kick it off with the bliss this start with a bit of an overview. Let’s let’s have a conversation around the you know, around what your thoughts were in the series about some of the all of the podcasts essentially, from an overall point of view.

Jeremy Cooper 

Yeah, thanks for bringing the the nine podcasts all together, I was struck by just how human each of the speakers was, these were people who really wanted to be doing what they were doing, you know, they weren’t they weren’t reluctantly, helping people. It was a very non technical discussion. In a lot of ways even though the ideas behind what some of the people were saying on the podcast were quite technically rich, they had a way of saying it in a in a simple and pretty captivating, sort of a way. And we sort of, you know, people talk a lot in the advice space about the soft skills, but you know, a lot of the speakers were talking about things like trust and reassurance and educating their clients breaking things down into, into simple chunks using visual aids in some cases, diagrams, videos, one person I think it was Nicola described herself as a confident, you know, that’s a that’s that really, that really resonated, you know, building, building trust and having people able to to rely on, on what you’re telling them.

Fraser Jack 

Yeah, couldn’t agree more. And I think advisors and planners around the country have always sort of been very good at that having those conversations. And I sort of think about it as a as a translator, that sort of translating this jargon and in corporate speak, which we’ve all become accustomed to, and then turning it around and say, Well, actually, in the eyes, or the ears, or the, or the feelings and thoughts of inclined, it’s very, it’s a very different language that they need to then speak. So let’s go through let’s go through some of the the series where this is talking about some of the conversations perhaps for maybe the first episode, regarding with, with Martin, some of the things that really struck me with him is around the budgeting in cash flow of retirees around that spending conversation. And again, obviously, we bring in the human element. And one of the things that I noticed him mentioned was the concept of the pension thing, this silver lining,

Jeremy Cooper 

yes, yeah, I look back and was terrific. Because, you know, some of the work, we do a challenge, and we try and distill things, you know, just like those people do try and distill things down into very simple ideas. And over the years, you know, one of the ones that we use to talk about retirement is we used to say that cash flow is king. And so in a world where we save up, and what what is king there is, is really high investment returns taking the least amount of risk at the lowest cost. You know, that’s what as the person who sort of thought up the my super idea, that’s, that’s what my subida just words away in the background. And it doesn’t the only cash flows that are involved, the ones being put in by your employer. Typically, when it comes to retirement, that kind of flips on its head, what’s actually important is that you you get the spending money, if you like, because that’s what retirements about deferred consumption that you could otherwise have enjoyed in your working life. And now you’re getting it in retirement. And this is we heard this over and over again, in the, in the discussions we heard people saying, I think it was, there was no saying that people you know, are really reluctant to, to spend their capital. And and, you know, the job of the divisor is to give them the confidence to do that. It’s partly psychological. It’s partly giving them the products that help. And yes, the role of the pension is your you know, if you’re entitled to age pension, that’s your fortnightly paycheck from the from the government. And I often get people to think about the age pension and say, Well, you know, that is, in a sense, the the archetypal retirement income product, you know exactly what’s coming. It’s it’s unquestionably income, it’s for spending. It’s not for putting in the bank. You know, there are as I think it was no, again, he sort of said, Well, there are trade offs with that you can’t pull an age pension, he can’t hold a lump sum out of the age pension, it does a specific thing. But it’s where you should be starting, it gives you that peace of mind that security that other other sorts of retirement income products don’t give you.

Fraser Jack 

Yeah. And then we talked about the mindset of spending, and again, that there was a few people that talked about this, but that mindset of spending your savings when you have spent your entire life, not spending it, you know, the whole purpose was to continue to force feed the savings. And then that that, then to tip it upside down and say it’s not savings anymore, it’s with a really hard mindset for the end consumer.

Jeremy Cooper 

I call it the as if we need more battlegrounds in the in Super space. But this this resistance to consumer capitalism is the real sort of battleground at the moment. And I’m sure it’s an area where advisors are spending a lot of their time. And it’s partly because of the low rate environment where you know, even as recently as just going into the, the GFC, which I suppose is getting a few years back now, but you could buy a 10 year Commonwealth government bond that yielded You nearly 6%. And so what I call a yield based retirement where you don’t consume your capital, there’s quite a realistic thing for pre retirees and retirees to be thinking about. And, you know, for the foreseeable future, that simply is not the case. And so when people talk about and think about retirement income, that is not accounting income, or a yield, I think, obviously includes that. But it also includes a steady and safe rate of consumption of your capital. Otherwise, you’re simply not going to you know, for most people, you’re simply not going to be able to sort of have the standard of living that you’re really entitled to. And in a world where all your kids have got their own suit. The imperative to leave sort of large slabs of your own retirement savings to the next generation, the drivers just just should no longer really be there. Yeah, it’s

Fraser Jack 

very that’s a very interesting Isn’t that the fact that a lot of the retirees now their kids will have almost had a full working life of super guarantee? look after them when they get there. So now I wanted to talk a little bit about also, when when I think about what what Gail said in the second episode, a lot of one of the things that really struck me when I spoke to her was just the the level of fear that’s around some people approaching this stage of life, especially if they’re maybe they’re single. And she mentioned a stat that stuck with me around, you know, single women over 55 being at highest risk of homelessness, and just that word, homelessness, approaching that time of your life struck a real chord.

Jeremy Cooper 

Yes, look, again, I think Gail was very strong on the human side of things. But the status, the marital status of retirees was another one that came up a few times. And there are some very interesting statistics. But I think one of the speaker’s civil appears sort of three scenarios, you’re either just a capital, or you’re single, because you could start as a couple and become single. And then there’s a third species, if you like, or situation where that you’re a capital, but in fact, one of them is, you know, often quite unpredictably, a carer, and all of the all of the different sort of combinations of those things. And they can have some quite significant financial impacts, obviously, particularly where the outcome is unexpected. And in some recent work we did with with national seniors, Australia, we did a fascinating survey of over 60 years, and we asked them specifically about their their marital status. And we found that 80% of these men, so 60, and above all the way up to, you know, quite older ages 80% of them said they were partnered, only 44% of women in that age group said our partner, Now initially, we were turning these answers upside down and scratching our heads and thinking, well hang on what’s going on here. But what happens is, of course, you’ve got just a number of things going on with those numbers, one on average, women outlive men by about three years. So they can be in a perfectly stable, marital situation. But the woman on average, it’s just going to outlast male. So there are a lot more much older and single women have in a population cohort like that. But perhaps more interestingly, were met where marriages either cease because of a death or a divorce, and the divorce has definitely happened in retirement. Men will almost predominantly anyway, will will almost certainly remarried typically, to a younger wife, and the women will not. And so this has got a, you know, pretty strong financial theme running running on that, because of course, we know from the signal that the age pension gives off that single ride age pension is relatively higher than the couple rides, because it’s actually more expensive to live alone. And so in planning and thinking about this, the particularly for women, the predicament of them, you know, spending a long time living alone and retirement, it’s got you know, it’s got a whole lot of social, psychological, but particularly financial implications.

Fraser Jack 

Yeah, incredible. Now, speaking of stats, actually, we were lucky enough to pick up some stats from Core Data throughout the series, and some very interesting stats in there. One of the things that struck me, of course, was the was the concept of control and controlling things as they happen. That was a theme, obviously, throughout the whole series, you know, trying to get control before things got out of control, if you like and the decision making process, obviously, it’s a lot easier to make if you if you’re planning versus, you know, reacting to decision. But one of the things that I was quite astounded about was the fact that I think Jason mentioned that there was only 7% of retirement was retirees retired when they planned to retire.

Jeremy Cooper 

That was quite remarkable. And, and, you know, the implication there was that it’s sort of, sadly, often they never, they never sort of from that, I suppose shock. They never quite recovered on the satisfaction score. After that, and I think also particularly striking for me was this similar statistic for people who were in a relatively recently divorced and then found themselves in an involuntary retirement situation, as well. There were some, you know, very strong correlations with what we wouldn’t expect between people who were who are renting in retirement, versus people who had a home but yet still mortgaged. And then the most satisfied were not surprisingly, people who had their own home with with no mortgage but a very interesting piece of work. back there. And of course, you know, it’s understandable that people want control and certainly uncertainty sort of moving into retirement. But you know, that’s a very difficult thing to actually achieve in a world where you have, you know, receiving a regular wage or salary into the situation where you’re effectively living off capital for the first time. We live in a very fast moving world, things are gonna keep changing. And unfortunately, a lot of retirees, bemoan the fact that, you know, the age pension rules, keep changing, superannuation keeps changing tax, it’s changing, and so on. And unfortunately, I can’t look anyone in the eye and say, well, there’s going to be a world soon where that’s not going to happen. And part of the reason why it keeps happening is the things underneath those rules keep changing. In other words, our demographics are shifting, a lot of things keep changing. And that’s it’s very difficult. And this is where these advisors where we’re doing such a good job trying to give the reassurance trying to provide the information as in a simple way. But that control motive is very strong.

Fraser Jack 

Yes. And sincerely interesting conversations around that control piece, because I think it’s it’s absolutely huge piece, I think we mentioned some likes, six, six out of 10 people, almost 617, people feel like they’re forced to retire at that time. And so. And he also mentioned, obviously, community and a lot of people talked about the community, being a being a big part. So you know, income, obviously, regular income community and control. Now, one of the things that, that we sort of touched on quite a number of times is and obviously Jason was talking about this, too, was this idea of collecting in a qualitative data with very good way as an industry understanding the numbers when it comes to, you know, returns or scientists stats around population, and but we’re probably not that great at collecting that happiness index type conversations around, are people satisfied? Are they stressed? Are they fearful? And if so, on a, on a scale of one to 10? whereabouts is that? I think, I think the medical, medical professional, quite good at it. Oh, no, you know, when it comes to how much pain Are you in, but there’s probably one thing that we could, as you know, as a profession, do a better job as

Jeremy Cooper 

I think you’re right. I think you’re right. And one of the most interesting that the reason that this broader topic of you know, financing retirement and the various elements of that is so interesting is that it brings together just so many different skill sets, from psychologists to statistician to, you know, you get into the heavy duty. Fortunately, we didn’t hear too much of the heavy duty stuff, but the whole sort of pension, finance, you know, projecting out into the future with unknown life expectancies, and all those sorts of interesting things. But it does bring together a huge range of human disciplines in this space. And I think that’s, that’s what makes it so interesting for me anyway.

Fraser Jack 

Yep. Yep, absolutely. Now we’re, we probably move on to some of the conversations we had with with Nicola Now, one of the things that struck me when I had a conversation with her was a really remnant of the conversation around the transition periods, and the time it takes for people to really transition to one stage of life to a different stage of life. And we can certainly talk about stages later on, as well. But just I resonate with what Jesus said, to talk about that process often being similar to a grieving process that we go through. And that that really brought that psychology, as you mentioned piece to me to say, Well, you know, what, I think that you could be right, there could be a process that we need to understand that people go

Jeremy Cooper 

through. Yes, I agree. And I think we probably don’t, you know, let’s, let’s face it, I suppose one of the ideas underlying this, this whole topic of the changing landscape of retirement is that, you know, it was it was only in a sense, 2011 I think was the date on which the post war baby boom generation really started moving into retirement with on average, you know, far more wealth than any other you know, superannuation was or a lot of people said superannuation is immature, I think they’re just not not looking at the numbers when I say that, but, you know, people households now retiring with the rest of the world is looks at Australia and says, Well, how did they do that? So this is, a lot of this is very new, even since the early 2000s. The average time average life expectancy of Australians is shot up in the last 20 years, by nearly a decade. It’s about it’s about nine years. So we just the speed with which this is happening, it is pretty new. People are going to be a long time in retirement, we still haven’t conquered the some of the cognitive decline and dementia problems. So about as we’ll know this, but if you’re sitting in front of the person who’s 65, that’s about a 10% likelihood that they’re already suffering from some form of dementia, and then when when they get into their mid 80s, that’s about a 30% likelihood, and we haven’t really cracked that, that wall not yet. So that’s it. That’s another sort of dimension if I can put it that way to this, you know, relatively new world with, you know, substantial numbers of our population, surviving to, to the retirement age, which, of course, is now effectively 66. And living a very, very long time. And I think was again, it was no, he reminded us that people underestimate how long they’re actually going to live in retirement, we’ve done some work again, with national seniors, if you’re in your early 50s, you’re, you’re massively under estimating that because you haven’t really thought that much about it. And as you age, once you get into your mid 70s, that sort of light bulb actually comes on. And people are actually pretty good statisticians around how long, long ago live, perhaps because they’ve seen colleagues and all the all the friends and so on, they’ve got some sort of better handle on just how long people are going to live. And you know, for today’s 66 year olds, that’s on average, you know, 87 for men and 90 for women, because that’s only the peak of the bell curve. So it’s a whole new ballgame that we’re that we’re dealing with, and there are a lot of things that we don’t yet know.

Fraser Jack 

Absolutely. It’s got to be a challenge for challenger in that respect, because obviously, there’s, as you mentioned, the superannuation system, you know, is, is well revered around the world, you know, an overnight success 30 years in the making? I feel like it’s been it’s not it’s not exactly, you know, we’ve we’ve been building on this for a long period of time to make it what it is, but I I’m interested in what you said, around the life expectancy, or the longevity piece there for people, because obviously, if you’re coming into retirement, and there is more money there, and there is more lifestyle, there is more, you know, information and knowledge about health factors, and, and all the other things that can extend your life, essentially, because you’re going in healthier, and wealthier. How does that work for I mean, there’s got to be a challenge for challenger.

Jeremy Cooper 

Well, actually, you know, yes, that’s a, you know, it is a very insuring pool of lives, is what we do for for longevity risk. In other words, we’re pooling lives together and adding shareholder capital, effectively to be able to protect people who live considerably longer than average. But in a sense, we benefit enormously from the law of large numbers, and then put it that way. So if we’ve got 10s of 1000s of lives in our pool, with the right accurate, additional buffering and supervision from after and all the capital, and so on. In a sense, I don’t want to run the play this, but in a sense, we have the easy path, because the law of averages, so there’ll be people in our pool who die younger than average, they’ll be people who there’ll be a lot of people that have data around the average, and then there’ll be the long leaders, but on average, because we’ve got so many lives there, you know that that law will we’ll see the the actual, ultimate financial outcome can pretty close to the average. And of course, we’re watching this all the time, when you flip out of our life, longevity pool to the ordinary people in the street, or, for example, the two people sitting opposite an advisor in their office, their life expectancies, you know, they can be part of our pool. But if they’re not the randomness, or the the variability, if you like their lives against the average, it’s far more significant than people actually understand these life expectancies are actually quite misleading and misleading for us. Because with the 10s, of 1000s of lives, we can still go haha, look, you know, we’re at the average. Whereas if you’re just one or two people, your lives, it’s about as sort of variable as stock market returns, we’ve actually done some work, which shows remarkable correlation. So they, you know, one standard deviation of life expectancies would say, you know, let’s make it easy. Let’s have the woman sitting there and 66 year old woman sitting there in the advisors office, she her life expectancy is anywhere. In two thirds of cases, she’ll die somewhere between 82 and 98. But not, not with any degree of certainty at the average, in fact, the likelihood of her dying at night. You wouldn’t believe this, but it’s less than one in 20. Yeah, individually. Life expectancy is quite a random and volatile thing in a pool. It’s not.

Fraser Jack 

Yeah, I think that was definitely one of the messages that came out of it too. You know, you sort of sit down say, according to the law of averages, you hear, but there are the 95% chance that you’re not average. So, so very good. You mentioned a few times obviously, no was You know a bit of a gem when it comes to the old thing superannuation he literally wrote the book on it. And so he was able to pass on quite a few gold nuggets or wiggle gems during his, his episode.

Jeremy Cooper 

He certainly did. And one of the, one of the really terrific winds was trying to reinforce his point of view, you can’t take in money with you, you know, this spending thing, you wrap it up by saying, well, you don’t fly first class Your kids will. That was fantastic. Yeah,

Fraser Jack 

he’s definitely a good straight shooter doesn’t even when it comes to all things around superannuation, and he you know, he also knows his stuff when it comes to all the different, you know, factors that around happiness and retirement and people being satisfied. And

Jeremy Cooper 

Eric is very strong on that is very strong on that. Yeah, was basically, you know, your sense of purpose. And you’re the things that are controllable. So your group of friends, how much exercise you do, and your diet? Well, you know, that’s, that’s pretty catchy as well, he was absolutely right. The other one I really liked from now was he said, Look, thinking about your, you know, your financial assets in retirement, think about it as a, he might not have used these exact words, but this is how it sounded to me think about a pie. It’s got three slices in it. One of them is the age pension that comes from the government gives you regular payments, you know, effectively triple A rated, yep, it’s there, then you got your private savings and what he meant there was your superannuation, your cash that you might have in the bank, or what have you that’s accessible and liquid, but it’s also can be, can be volatile. And then he talked about a lifetime pension. And what he really meant there was effectively, that’s your annuity slice if you like. And he didn’t use this this language, but what you effectively be doing there is you’re buying a little bit more of the age pension if you like this secure, regular money, and every one of those pieces of pie has a trade off, you know, the one slice doesn’t do everything, but in combination. That’s how you should be thinking about your retirement. I thought that was that was another gym. Yeah,

Fraser Jack 

it certainly was very, very much looking around the real well rounded, you know, eggs and baskets, and all those types of things around saying Well, there’s three main leavers and, and we can set these leavers so that to give you the best, you know, way of living in peace of mind and all those sorts of things, because it’s not again, it’s not just about the numbers, it’s it’s very much around the emotion and the, you know, people going through that process, which brings us to a conversation I had with Phil, really, I guess we kick this one off around the conversation around the baby bust, which is a bit of commentary, which has been out there for a while, I guess, at around the conversation of these baby boomers coming through and what’s that going to do to the actual system as it as they as they move through?

Jeremy Cooper 

Yeah, it’s interesting that because the the beauty of these podcasts is that I certainly didn’t have anything to do with who was going to speak and what they are going to say. And as I was listening to Phil and talking about Bernard Soltan the daily buzz paper, oh, gosh, I know that paper we actually worked with, asked for edits most recent annual conference just in early February, I interviewed Bernard about this paper, and it’s basically pointing out again, I’m talking a little bit around what I’ve been talking about this sort of new phase that we’re in the the emerging retirement income space. And the baby bath concept is in his in his research, he’s saying that in 2026, we’re going to have sort of what he calls peak Boomer. So in other words, this wave that started in 2011, that I was talking about, sort of reaches its peak in 2026. And the point is that all of those sort of he, in his inimitable style, he was talking about the sort of way that people who got free tertiary education as those were the sort of Whitlam settings if you like, they, they contribute to the workforce, and then they leave it. And so what happens, you know, do they do they do they cling on to their job, sort of younger people, sort of move them aside? And what happens to the economy when you’ve got, you know, increasingly fewer workers and more retirees, the economists talk about that as the dependency ratio. And so there are a lot of interesting things that that Phil spoke about. off the back of that, but I think one of the most interesting things for me anyway, he might feel was saying was this concept of what he called values based advice, and not not so much it was sort of species of goals based way I understood it anyway, but aligning with the values that the client has and tried to sort of fulfill loads rather than just constantly talking about money. And in fact, I think it was Phil who said, Look, it’s not about money, not about fees. It’s not about returns or adequacy. His role as sort of icons, if you like, of people who talk about this stuff, it’s really about taking stress off the client, advocating for them, not just retaining clients actually being an advocate for them. And, you know, through those mechanisms, helping them have fulfill their their values, which I just thought was a really nice way of talking about this. Yeah, absolutely. That’s

Fraser Jack 

definitely the the pathway to happiness, making sure that you’re, you’re filling those emotional values. And the other thing I noticed too, with, with this conversation is around the emotional state, we’ve sort of mentioned before around fear and stress and anxiety and worrying those sorts of things, and, and then providing this, you know, positive emotional state and a state of, you know, being happy and content and those sorts of things, helps make better rational decisions. And quite often, it’s very difficult from the planners point of view, to present a rational decision to be made to a person who’s in an in a state where they’re no, when they’re not physically or mentally capable of making those rational decisions, because they are stressed or anxious or upset or worried.

Jeremy Cooper 

Yes, yeah, I think that’s right. I think also, the the most worried people are the people that the sociologists and so on called anticipatory worry. So people who aren’t yet in retirement, they started thinking about it, and it really, really scares them. And as they move towards retirement, and then, you know, even I think it was, again, one of our podcasters said, that they thought it took a good 18 months or perhaps more for people to actually adjust into the circumstances of retirement. And you think about that, it makes sense. If you’ve worked all your life, there’s a whole routine that goes through company expenditures, the more expensive lunch that you have to buy in the city or the transfer, they all just disappear. And things settle down to the norm of what it’s like to be in retirement. And we, again, working with the National seniors, people tend to be quite okay with adjusting to whatever their new circumstances are. And the circumstances can in some cases be quite different from what was envisaged, or the lifestyle that was enjoyed while working, but they seem to be able to once they’re in that situation in night, I tend to find that it maybe wasn’t as bad as they were, as they were fearing. Yeah,

Fraser Jack 

absolutely. Again, it comes back to that bed transition process. And perhaps we you know, whether it’s similar to a grieving process or not, could be for a lot of people. But there’s it’s definitely a an emotional process that to go through. And then you’re absolutely right, the conversation did tend to be once people have gone out again, is a bit like riding a bike. I’m used to it now. I’m actually okay. I don’t know what I was worried about with that fear and anxiety was coming from so with as we move through the conversations, we sort of talked about a lot of around aged care around a lot of retirees having both experience with aged care, not just for themselves, but for their parents.

Jeremy Cooper 

Yeah, well, I think we find we challenge we, we have products that seek to help in the Aged Care situation, and often the not necessarily our clients, but there’s considerable stakeholders, nonetheless, in some of the discussions and decisions are indeed, the generation of effectively the children of the retirees who may be in their let’s, let’s say their 50s, or perhaps the 60s era, intimately involved in, in sort of helping with some of those decisions often, often, often made, you know, more or less at the last minute, and I think Rachel spent a bit of time explaining how you, you have retiree to resist, defer decisions, or even sort of actively declare war on the idea of going to use words that were reasonably similar to that the idea of going into residential care. But she explained that, of course, you know, everybody thinks it’s just residential care, but there’s a whole panoply of different choices that can be made. And that’s really where the advice value proposition comes in. Yes, the, the finances again, it’s like getting the age pension all over again. quite complicated, but Rachel was in planning Hey, that’s, you know, the the advice piece is actually all about what you can choose what you get or don’t get. And so there’s a whole world of making things better, so long as you’re you’re getting the right kind of advice and other that was extremely valuable. material.

Fraser Jack 

Yeah, Rachel has a very good way of explaining a lot of that and putting people’s mind at ease a little bit too, with what’s available. One of the things that he also mentioned that I was intrigued about was the and we sort of talked about this with the baby bells conversation is around aged care. And the fact that I think she mentioned something like this going from 1.3 million beds to 3.5 million beds, and in 2015, or there abouts. So that’s a huge, you know, the bubble if you like coming through into aged care and what’s that can do for the aged care sector. And obviously a little bit of that was addressed at the role of the Aged Care Royal Commission. But it doesn’t say that there’s been too many outcomes from that

Jeremy Cooper 

Rachel painted a pretty challenging kind of story about where she I think she was privileged, saying that some fairly major changes were going to have to happen in this space, you know, to use one example of that. Well, one interesting point she made was, indeed, the gauge curve workforce itself. So the people who service aged care facilities are aging. And so not only is there pressure on things as they are now, but as time as Time marches on, where all those workers going to come from. And I think she was prestiging a world where things gonna have to centralize themselves in how hard was it one point I think she was talking about? Well, think about it there. There just aren’t enough nurses in Australia to be hopping in cars and driving from from home to home. In a world where we think it’s easy, we’ll just, we’ll just everybody, you know, in home care Well, okay, that sort of decentralizes things, but it comes at an enormous service cost of getting to all those different locations. So I think she was optimistic in the sense that she can see the sort of changes that she thought needed to be made, but they, they involve some fairly dramatic shifts from what we’re doing at the moment.

Fraser Jack 

Yeah, absolutely. That and that includes, you know, developers building these types of facilities and hubs and who exactly, and all sorts of things. So yeah, that was really interesting.

Jeremy Cooper 

Who’s gonna pay for it all?

Fraser Jack 

Exactly. And, and just the sheer mindset as well, too, that the baby boomers don’t want to do things the way that their parents did them. And I guess that was true. That works for every single other generation. I don’t think my kids want to do things that way. I do that for sure. Now, the next, the next person we heard from was Sheena, regarding a lot of the centerlink side of things. And obviously that’s been, that’s an interesting process for a lot of people, there’s a lot of often can be a lot of fear, or pain points around dealing with centerlink.

Jeremy Cooper 

Yeah, this was, yeah, this was this came through a lot, particularly with Shane, or even just the idea of these, I suppose intermediation or you might call them called concierge services where it’s become a viable business to, to effectively help people access a government agency, like like sampling. And cheney was another person who spoke with great passion about what she was about what she was doing. And that that sounded great. And obviously, adding a lot a lot of value. And indeed, challenger itself funds funds, you know, there’s to be a thing as well. So we have a reasonably short period of time got a special arrangement with a similar, I’m assuming similar outfit to advice link that the chain has got. They’re called retirement essentials. And challenges offering advisors, as I said, for a limited period. And there’s a Microsoft that we’ve set up where people can go and have a look, we’re offering a free access to retirement essentials to give advisors the the experience of getting this very sort of assistance with guiding people through the perils of assembling and just giving clients a sort of an assessment of where they might be in relation to the age pension. And we again heard from Siena about people’s just reluctance to you know that they’re still with some retirees have a stigma or just a reluctance. They don’t think they’re entitled to it and so they don’t access the age pension. Indeed, even in our research we look at we look at age pension access by by age, because a lot of people talk about the age pension just as a as a great big blob. What I mean by that is they talk about everybody over 65 accesses the the pension on average of hips, for example. That’s not a very informative number. Let’s look by year groups. And what we see is that very new retirees, so if we were looking at for effectively 66 to 70, it’s actually a very low rate of access to the age pension. Now this this could be driven by a number of different things, longer participation in the workforce, lack of eligibility because of high super balances. But we get the sense also there’s this kind of lag or reluctance and Oh, geez, I don’t have to, oh, there’s some people who absolutely need to front up the st link on day one to get their age pension because they simply wouldn’t be able to survive. They as a, as a middle group who, who seemed to take a bit of time, and services like this, coming into that space to just just take the take the pain away that effectively.

Fraser Jack 

Yeah, I think the services that, that you’re offering a fantastic obviously, there’s reasons why people don’t don’t approach them or don’t really feel like it at the time. And obviously, time is one of those things amount of time it takes to to spend and they’d rather be doing other things. But also the fear of rejection or fear of being told no. And in the end, the the just the misunderstanding, I guess, of a lot of the concepts, but I think a lot of the time again, you know, advisors are very good at translating being the translator when it comes to financial services products. And I think we come in need almost that translation service, when we’re talking when we’re talking about Centrelink items. So there’s that, but I also think she she hit the nail on the head when it comes to you know, people in Simulink I just humans, doing the best doing the job. And quite often they they you know, they put in a situation whether it’s a you know, they don’t requite always know what’s going on. And they they’re they dumped in a situation where they have to help people and and so yeah, sometimes it’s just the fact that, you know, a training training problem.

Jeremy Cooper 

Oh, yes. Yeah, that’s a it’s a hugely technical, you know, this is why these specialists, I suppose to develop it, but it is a, you know, it’s a specialist niche, particularly with, you know, dual means tests and all that other kind of complicated sort of stuff. So yeah, it’s not easy.

Fraser Jack 

Yep. Fantastic. Now, we move on, through the series of getting towards the nail, we spoke to Richard. And I really love what he talked about with the different stages of retirement and how we explain that to his clients.

Jeremy Cooper 

Oh, yeah. No, it was great. Yeah, that you have to lock the teenagers and comfy shoes and the comfy chair. And I thought it’s, I thought the teenagers was particularly resonated, people who’ve been locked in the workforce bringing up kids, all of a sudden, they’ve got a bit of free time and a bit of their own money. And it just got to sort of let the real out a little bit and let them do their thing. So I thought that was that was really interesting. And quite useful. Again, I think it was it was Richard was talking about how long it takes to adjust into, into retirement. But but also he was a big one, on what he called the sort of purity of income and security of people, you know, regular, regular needs, I think he had a nice little sort of rule of thumb where he said that, you know, for for clients who needed say, $50,000 a year, they get 80% of that from the age pension and an annuity. And then the 50. Below, he’s assuming that they’ve got additional liquid savings in the form of super which in a good year is going to top that up in an in an election year, maybe not. And that’s the he call that their payback. And and this is something a challenge that we just always talk about, you know, in retirement, where’s your retirement paycheck coming from working out, you know, what you actually need, as opposed to what you want. And again, in one of the podcasts, there was I might have even been in Jason’s, but I’m not not 100% sure that a very high number, surprisingly, high number of people surveyed, or in this particular client base could actually say, make the distinction between expenditure that was needs oriented, as opposed to wants oriented. And the idea is, of course, when you have a year, that’s not not so great, you can reduce expenditure on the words. And indeed, this comes back to, again, in one of the podcasts we heard about, the sort of core function of the advance was really doing an annual cash flow forecast, which is kind of a cable another years past. This is where we started out, this is what happened. And you know, now we’re going to talk about what it looks like going forward. And that would largely be a mixture of the investment return experience, I suppose the portfolio how much we’ve been spending over or under the budget. But interestingly, also, and this came out in a couple of podcasts, the relevance of understanding things that might have changed from a health perspective with the client. So you know, there’s no point sort of robotically spitting out, you know, average statistics about things if one of your clients has unfortunately just received a cancer diagnosis. So this is it is a sort of swing factor and very much what the, you know, the value that can be added, I suppose, in the annual catch up is really just to understand, you know, how things going from from the health perspective.

Fraser Jack 

Yeah, absolutely. Yeah, this is definitely a lot of aspects that cash flows. Funnily enough cash flow comes back to being king. Again, doesn’t it? You know, Surely you’ve enjoyed us yesterday, the income project Finding that emotional state of being actually I’m okay on and I will get income coming in. I know I can pay my bills. But yeah, I do, I did, I did really enjoy Richard describing those their teenage years, you know, as you mentioned, the freedom word, you know, getting some freedom from the from the daily grind, or from, you know, kids leaving home or whatever it might be very similar to the freedom of, you know, getting your driver’s license or, or leaving home for the first time. So I thought that was an absolute classic. And I think the, there was some conversation that came out around those three life stages being, you know, able or less able and dependent his terms, but I really did enjoy your Richard’s interpretation of that. Now, obviously, that’s sort of the the series that of the people we interviewed. But there’s obviously a few other things when I think about you, and I’ve spoken about the changing landscape of retirement, that we sort of didn’t cover so much in these episodes, but things and we’ve sort of touched on intergenerational tensions, but technology is one that I’ve always, you know, enjoyed. And we sort of did talk a little bit about technology in the series and, and embracing technology. And, and, you know, debunking The, the idea that retirees don’t want technology,

Jeremy Cooper 

technology came through in a lot of the, a lot of the podcasts and in a positive way, it was either that they were, they were using them, they weren’t making a big deal out of it, but they were using, clearly using tools in, in helping their clients. And there were opinions expressed about, you know, the typical retirees have, they’ve got kids overseas, I mean, that’s a trash about itself. And so, you know, that that, in a sense, creates a need, and a use for technology. So I think the, the themes were positive, but if you project out if we’re talking about, you know, how this how this might continue to change, there’s no doubt that we are going through globally, a period of a very rapid technological change, and the concern and the issue for retirees that once you disconnect from a workplace, you are effectively your own IT manager. And indeed, we talked earlier about the next generation that the role that adult kids can play in this, you know, I think my parents are in their 80s. And, you know, I’ve done things like buy a mom an iPad to try and keep her up with the bit that, you know, she can now no longer use that. And so, the fear is that as you as you get get older, it just becomes more and more difficult. Imagine, imagine if you just been just been a little bit too old to catch on to the smartphone, world, if you like and so, you know, particularly during COVID, he didn’t, didn’t weren’t carrying a smartphone, it’s very difficult to keep up. And so that’s a bit of a metaphor, I suppose for the for the challenge that lies ahead for a lot of retirees.

Fraser Jack 

Yep. Fantastic. Now, when we also had some conversations around, you know, global risks, and, you know, all sorts of things from climate change through to, you know, obviously pandemics and how that’s affecting, you know, retirement.

Jeremy Cooper 

Yeah, look, I don’t want to make too much of this. But I think, you know, again, for people who have been in retirement for a while, perhaps the prominence of climate change issues in our society is going to become more pronounced than, than it is now. And again, for people who just sort of haven’t really been on board with that, they’re going to find, I think, that even investment products will be sort of captioned, you know, it’s a climate change for, you know, very rapidly, we’re going to move into a world where, you know, for those who are participating in workplaces, and in the still in the working age population are going to find a significant amount of change, but from people who are sitting at home, they’re going to find it quite confronting just how quickly we’re going to move into a world where climate change and climate change investment products. That’s really what I’m talking about, again, to become a real real thing yet certainly,

Fraser Jack 

certainly, well, I don’t call it a train because it certainly but it’s a change that’s taking place and a lot of people taking that very seriously, especially when it comes to you know, the in consumer having preferences around what they want, or how they want their money invested based on their beliefs and their values. Yeah. Just quickly before we go, I wouldn’t mind touching on the you know, the inequality, the the gender pay gap, the gender superannuation gap conversations, because that’s not really something we spent a lot of time talking about within the within the series, but it’s certainly something that is part of the changing landscape.

Jeremy Cooper 

Yeah, I think. I think the research we do shows that the the gender gap is is narrowing. There’s an interesting trend where women who can do this in their 50s tend to be topping up a little bit on Super I know with the recent cabinet Cabinet reshuffle the chain him as assumed responsibility for I think it’s called women’s security financial security. For there are a lot of people looking at ways of closing the gender gap is the gap the gender gap in Super or in retirement savings is really just a derivative of the employment gender gap. It’s, it’s a secondary symptom if you like. But, you know, for the reasons I spoke about before, you know, you may go into retirement as a as a financially well off household, things can happen in retirement, and it’s often the female who finds herself living longer and living longer alone. And that it’s that it’s that tail end piece. And for women who who are already living alone, pre retirement, it’s even more burdensome, because of the the feature I spoke about before. It’s simply like buying a house, by yourself, it’s simply more, you don’t get the sort of economies of scale if you’re having having two people contributing.

Fraser Jack 

Now that exactly right. So there’s some, there’s still so still some stuff to work on there. Now, the other thing I just wanted to quickly touch on was the mean of the conversation around working, stop working and retiring being the you know, the line in the sand, but as we know, there are a lot of people that then you know, cut down to a few days a week or go part time or spend some time consulting or spend quite a bit of time working into their, you know, retirement years. Do you see that becoming more, you know, how do you see that as a trend is that becoming more and more in the,

Jeremy Cooper 

the data takes a little bit of a while to to become visible. But you know, right now, certainly in the in this decade, the age at which particularly well educated and you know, reasonably well off, it’s a little bit different if you have a blue collar job, but people are going to be spending, you know, remaining in the workforce to match older ages, because they want to, because they can, and COVID has had a real has really given this a real Philip. So that older people in in the 60 plus age group, so people of my age have experienced, you know, involvement, again, it’s been involuntary through COVID. That, in fact, they can perform their roles, either entirely from home or partly from home and partly at work. So they’ve already had sort of a 12 month pre taste of what it may look look like not to retire, but to move into a sort of interim period where they may be fully employed. But doing it in a sort of way that feels a little bit like pre retirement. So that’s been a, in a sense, a remarkable, positive. That’s the tilt. And, you know, we, one of the speakers was talking about the idea of, you know, taking as much annual leave as you can before retirement to sort of get in the field. Well, we’ve been given we’ve had a turbocharged version of that by the end of COVID. So there isn’t that sort of cliff edge where you know, on a Friday, you sort of get to gold watch and hand the keys back in on the Monday retirement COVID is actually sort of sliced through that. Yep.

Fraser Jack 

Now, now, thank you. Thank you very much for joining me and having this conversation today. If we chunk back out to the big picture, looking forward into the future, how do you see, obviously changes is going to happen? There’s gonna be, you know, there’s a whole lot more changes coming down the track, we’re just not sure where they are. What are your predictions on those? You know, one of the things that are coming sooner than later, or what do you think are things that we need to work on first, for that for the entire system?

Jeremy Cooper 

Well, it seems as if the debate about the SGA going up 12%. As you know, I think there are some well informed leaks that that’s that scanner, continue on, it’s on its path up to up to 12%. I was been relatively ambivalent about that last year, because you’ve got to be you’ve got to be under 50. To actually feel the because of and again, I’ll attribute this to No, but now I’ll reminded us over and over again about the the impact of compounding, and having having money that’s been sitting in the system for a long time. That’s where you get the kicker and the reason why super is working so well now, is that we went up to 9% in 2002. Okay, nearly nearly 20 years ago. So yes, you know, overall, going to 12% is most likely a good thing on balance. But if you’re 50 or over, you’re really only see an incremental change in the in the amount that you retire with younger people. Yes, it’ll make a considerable difference. So we can kind of push that away as being a big deal. I think the big the big change, we’re going to be in low rate environment for, for that as long as it looks like we’re going to be and people certainly not going to be living shorter lives, they’re going to be living longer ones, it’s this giving people that confidence to spend their retirement savings. Protecting the longevity risk. And longevity risk is not something that you really spend a lot of time talking to clients about. It’s, it’s not a topic, they really grasp, they don’t necessarily want to be thinking about their own lifespan and their own death, and so on. So you can kind of put longevity risk under the bonnet. But what you’re really doing in adding a longevity risk product to the mix is you’re giving them the confidence to spend out. And this is what the government is working on in relation to one thing they call the retirement income cabinet, which creates a new duty on trustees of large funds to have a strategy that actually does exactly that gives people the confidence to spend. So that’s going to be the big change, because we heard from a lot of the speakers that people are effectively self insuring they’re creating their own buffer of capital, which is what a life insurance is. That’s what that’s what challenges us, we get shareholder capital to buffer and make sure that your annuity payments can be made. And what we have in the moment at the moment all around Australia is retirees doing that themselves. And as a result, they don’t have the confidence to spend that. And they’re passing the money on to the next generation. So that’s really the big change. That’s, that’s coming.

Fraser Jack 

Yeah, fantastic. The UN in your absolutely right, the competence and spending that certainly what the government in the economy is after at the moment as the current state of where we’re up to. Jeremy, thank you so much for chatting with me today. Now, what are the next steps from here with regards to I think, I think there’s, there’s a thought piece can be created out of this series? And how can people find or?

Jeremy Cooper 

Yeah, we’re looking forward to to writing up some piece of work and thought leadership, if you like, summarizing and picking out the all the interesting points from the podcasts. And what we’re wanting listeners to do was to register to get one of those. And you can do that by going to challenge comm.au forward slash x y. That’s a simple URL. And when the thought bases down, it’ll turn up in your

Fraser Jack 

email inbox. fantastic thing. And thank you and please pass on our thanks to everybody at challenger for sponsoring this series. It’s been fantastic to have you on board and really appreciate it.

Jeremy Cooper 

It’s been a great pleasure. Thanks.

Fraser Jack 

Well, there you have it. And that concludes our series sponsored by challenger regarding the changing landscape of retirement. I’m Fraser Jack, and it’s time of that time of the week where we do a couple of shout outs and I’m joined by Emily. Welcome, Emily.

Hey, Fraser, how you doing?

Fraser Jack 

Very, very good. Thank you. Very good. Now, who are we shelling out to today.

All right, today

we are going to give a shout out to Haley night. She jumped on for an x y plus web event recently and totally crushed it. She shared some phenomenal strategies and tips. We actually went through the top four mistakes that advisors make when looking for an outsourced paraplanning relationship. And to counteract that she gave us a bunch of tips to help advisors find a productive and profitable relationship with an outsource paraplanner. So lots of great takeaways, and they’re very generous with what she shared. So it was just a really, really good way to level up and understand how to find a great outsource protoplanet So thank you, Haley.