Cognitive limitations and changes in processing speed impact how Australians in retirement make financial decisions, and research from the ARC Centre of Excellence in Population Ageing Research (CEPAR) in collaboration with Neuroscience Research Australia (NeuRA), said altering the choice scope of superannuation to cater could be the solution.
CEPAR chief investigator at the University of NSW, Kaarin Anstey, said about eight per cent of Australians in their 60s experience mild cognitive impairment.
CEPAR chief investigator at UNSW Business School, Hazel Bateman, said Australians nearing retirement score higher in tests of financial literacy than younger people or those in other countries, but that half of them answer basic questions about inflation, interest rates, and diversification incorrectly.
“As the population ages and more people face cognitive limitations, we need to consider whether the choice architecture of superannuation can cope,” said Bateman.
Some recommendations from the study suggested better regulation of information provision, financial literacy initiatives for the elderly, and protections against poor financial advice to vulnerable consumers could aid elderly financial decision-making.
Bateman said CEPAR would research how the “oldest old” process information relating to the Australian retirement income system.
“The need to allow individuals their financial freedom while mitigating confusion and poor decision-making among this age group is something that has yet to be reconciled in the literature and in policy,” she said.
