More than a year on from the savage but brief COVID-induced crash of early 2020, investor confidence has soared higher along with markets. For retirees, however, staying confident in all conditions requires a different trick…

The COVID-19 market crash began on February 20, 2020, according to Forbes magazine, spinning out of control in March as coronavirus uncertainties triggered investor panic.

“Investors watched as their retirement savings lost 30% in two weeks, and speculation about how bad it could get created even more fear among investors,” Forbes says.

By April 7 it was all over: investor confidence surged back in record quick time, lifting markets and moods over the ensuing year and beyond despite the real-world pandemic backdrop.

The morale-boosting market mood has certainly showed up in the latest Allianz Retire+ gauge of retiree sentiment.

Based on a survey of 1,000 current and prospective retirees (the latter defined as up to seven years before the official retirement age), the ongoing Allianz Retire+ study found a dramatic jump in financial confidence in the group compared to the 2020 data.

Just 12 months previously, for example, almost one-in-five respondents cited the risk of a sharemarket plunge as a top concern: in 2021 only seven per cent of those surveyed remain worried about market downturns.

Other survey indicators also show a marked year-on-year improvement, including:

  • about a quarter of current retirees still fear they don’t have enough money to fund a quality retirement lifestyle – while this statistic remains worryingly high, last year the figure stood at 40 per cent;
  • roughly one-in-five retirees face day-to-day concerns about making ends meet in 2021 – again the 2020 result was much higher at 31 per cent; and,
  • only 8 per cent of respondents this year feared they might become a financial burden for their children, half the proportion in the 2020 survey.

In 2020, and at the peak of the crisis, 40% of prospective retirees cited having lost money as global sharemarkets tumbled. Now, in a show of positivity likely ignited by the sharemarket recovery, only 18% say they have lost money during the pandemic.

And while those in retirement appear more financially relaxed, fear has also eased among the pre-retiree cohort where only 12 per cent report concerns about losing their jobs – about half the level of the 2020 survey.

Adrian Stewart, Allianz Retire+ CEO, says the rapid recovery in retiree confidence during 2021 reflects increasingly upbeat financial conditions.

“Clearly, the sharemarket rally over the past 12 months has made retirees feel better about their retirement savings and quality of life,” Stewart says.

However, he notes that post-survey lockdowns in Sydney and Melbourne may have taken some shine off the confidence data.

“If we conducted the survey today, I suspect there would be an increase in uncertainty, particularly among prospective retirees who faced extended lockdowns, and those who sadly have less job security or who were potentially forced into retirement earlier than expected” Stewart says.

De-linking market moves and retiree moods

If ongoing COVID uncertainty is playing understandable havoc with short-term general confidence levels, the Allianz Retire+ chief says the market-linked retiree mood-swings identified in the survey point to a deeper, unsustainable trend.

“When sharemarkets rise, retirees feel more confident and secure. When they fall, more retirees worry that their savings will not last as long as necessary,”

Stewart says. “It shouldn’t be this way.” He says given volatility is an intractable feature of investment markets, retirees and those close to retirement will remain captive to nerve- and portfolio-shredding events unless they can protect the income-generating power of their savings from permanent damage.

Allianz Retire+ designed its Future Safe strategy specifically to meet this growing gap in the retirement income market, allowing investors to fence-off an appropriate proportion of their savings to efficiently safeguard from large market drawdowns.

The imminent Retirement Income Covenant law, expected to be in force mid-2022, will bring the issue squarely in front of super fund members – and spark further product innovation.

In its survey, Allianz Retire+ also uncovered some notable differences between respondents based on retirement status and gender that future strategies might address.

For instance, 40 per cent of prospective retirees were worried their savings would not sustain a quality lifestyle in retirement compared to 25% of current retirees.

Furthermore, female retirees in general reported feeling less confident and in control of their finances than male counterparts – statistics that remain consistent across successive waves of the research.

Stewart says product providers can ease some of these investor concerns through better education and engagement programs.

Right now, though, many retirees – and those on the cusp of retirement – could do well to be alerted to the many benefits of establishing an advice relationship; as well as taking heed of the risks lurking amid confident market conditions.

“Retirees should be able to sleep easy at night knowing their sharemarket-exposed capital is protected against market falls,” Stewart says. “Their confidence shouldn’t go up or down on the whims of sharemarkets. It should be constant, so they can enjoy retirement.”

This material is issued by Allianz Australia Life Insurance Limited, ABN 27 076 033 782, AFSL 296559 (Allianz Retire+). Allianz Retire+ is a registered business name of Allianz Australia Life Insurance Limited.
This information is current as at November 2021 unless otherwise specified. This information has been prepared specifically for authorised financial advisers in Australia, and is not intended for retail investors. It does not take account of any person’s objectives, financial situation or needs. Before acting on anything contained in this material, you should consider the appropriateness of the information received, having regard to your objectives, financial situation and needs. Past performance is not a reliable indicator of future performance.
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