Australian retirees are interpreting minimum pension drawdown rates as proxy financial advice from the government and holding back on spending more of their savings, according to a recent study out of the University of New South Wales (UNSW).

The October 2019 study, ‘Spending from regulated retirement drawdowns: the role of implied endorsement’, found that 30 per cent of retirees were influenced by the “implied endorsement nudge” of a mandated minimum pension drawdown rule. “While regulated drawdowns compel regular withdrawal of pension wealth there is no requirement that these withdrawals be spent,” the study stated.

“However, we suggest that the regulated nature of the drawdowns could provide strong guidance via implied endorsement for how much to spend, and retirement spending trajectories may follow the regulated drawdowns as per the stickiness of defaults.” According to UNSW’s Professor Hazel Bateman, one of the paper’s authors, the finding contributes to the broader issue of retirees’ reluctance to spend their savings.

“In the early years of retirement, the minimum amounts are four, five and six per cent of assets and the assets are still building,” she says. “People aren’t spending even though we have well designed policies to encourage them to do so. They’re spending slower than we think they should and even building assets in retirement.”

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