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Take this guide with you when you visit your financial adviser. Contemporary annuities offer a choice of term, payment frequency, return of capital and inflation protection, so they can be structured to help provide the level of income you need to meet your essential lifestyle needs. Their features include: Regular payments in return for a lump-sum investment Competitive earning rates fixed at the start of the investment Fixed terms from one to 50 years, or for your lifetime Regular payments made monthly, quarterly, half-yearly or yearly Guaranteed regular payments regardless of share market movements and volatility No management fees (note, you may agree to pay fees for services provided to you by your financial adviser) Tax free payments for those aged 60 or over if bought with superannuation money Most can be tailored to provide benefits for your spouse or another dependant Liquidity in the form of a guaranteed withdrawal period of 15 years in the case of s Liquid Lifetime annuity and 10 years for s Care Annuity. This general information is issued by Life Company Limited (ABN 44 072 486 938) and is not personal financial, tax or social security advice. Before investing, you should read the relevant product disclosure statement (PDS) on www.challenger.com.au. The word guaranteed means payments are guaranteed by Life from the assets of its relevant statutory fund. July 2013 Clients Joe and Tina Age 65 and retiring Assets $300,000 superannuation in Joe s name Goals To always have money to pay for basic costs of living, have enough income to live comfortably, make sure their savings last the rest of their lives and protect against share market risk. Joe and Tina are 65 years old and However, they would prefer a slightly more comfortable retirement, particularly for the first ten years while they re retiring. Joe was a store manager and most active.they think they would need $50,000 per year Tina was a stay-at-home mum. They to achieve that. have $300,000 in superannuation, all Joe and Tina will receive some secure income from the Age in Joe s name. They own their home Pension. Under current rules 2, this is $30,818 in the first year of retirement. They expect their Age Pension will be less than and have $20,000 in home contents. their minimum income requirement, so they would like to They have no other financial assets find an additional source of secure income to make up the or debts. difference of $2,182 and ensure they can pay their bills. Joe and Tina s life expectancies are 18.5 and 21.6 years Joe and Tina estimate they ll need respectively a minimum income of $33,000 per 3. This is an average only they are in good health, so could expect to live well past age 90. Like many year to maintain a modest lifestyle Australians, Joe and Tina fear that their savings will not last as long as they will. in retirement (this is roughly in line Joe and Tina are concerned about share market volatility with the relevant ASFA Retirement Standard 1 and would like moderate exposure to growth assets ). (50% in growth assets, 50% in defensive assets). They visit their financial adviser to find a suitable solution. 1 The ASFA Retirement Standard benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years. Visit www.superannuation.asn.au/resources/ retirement-standard for more information. 2 Based on the scenario where Joe converts his entire superannution into an income stream and drawing the required legislative minimum. 3 Source: Based on 2005-2007 Life Expectancy Tables from Australian Government Actuary www.aga.gov.au Client Betty Age 87 Assets $400,000 in cash Goals To minimise ongoing aged care fees, maximise Age Pension entitlements and receive a secure income from her investments. Betty paid an accommodation bond of $250,000 to enter Betty is 87 and widowed. She was the home. She sold her house to pay for the bond and has living on her own for some time $400,000 left over. She now wants to know what to do with after her husband passed away, this money. but has become frail with age. If Betty leaves her money in cash, under the current aged care rules, she will pay total aged care fees of $18,600 per annum After researching her options with (consisting of basic daily care fees of $16,257 per annum 1 the help of her family, Betty was and an income-tested fee of $2,343 per annum 2 ). Betty s Age Pension entitlements will be $15,396 per annum assessed by an Aged Care Assessment 3. Betty has visited a financial adviser to find out if there s a way Team as requiring low level care and to reduce her ongoing aged care fees and get more from found a suitable aged care home to the Age Pension, as well as get a secure income from her investments. move into. Annuity Provider of the Year Award 2010 WINNER 1 Under the Aged Care Act 1997, the basic daily fee is $44.54 per day as at 4 June 2013. 2 Calculated as: (Total assessable income Total assessable income-free area) x 5/12. 3 This is the amount of Age Pension Betty would receive if she held $400,000 in a bank account. We aim to provide you with: Secure products Coaching and education support Technology solutions Efficient services Whether considering options for yourself or deciding how best to help someone close to you, aged care is a complex area and requires careful thought. The uncertainty surrounding where to move, how much it will cost and where the money will come from can be overwhelming and stressful. This guide provides the basics. You will understand the steps you need to take, where to find answers and how your financial adviser can help you make an informed decision. Adviser support tools Brochures Guide to annuities Secure your future with a safe, reliable income stream Guide to annuities Introduction to annuities and how they are used in retirement. Includes a case study and FAQs. Case study Setting up a secure retirement income Setting up a secure retirement income case study A case study explaining an income layering strategy. CG code: 760 CG code: 828 Annuities at a glance Product features Annuities at a glance flyer Information sheet on the features of annuities, portfolio construction and. Case study Managing aged care fees Managing aged care fees case study A case study comparing three alternative strategies for someone entering aged care. CG code: 963 CG code: 827 About Life brochure Retirement Specialists Retirement Specialists About Life Brochure answering common questions around s statutory fund, the safety of annuities and. For advisers and clients. CG code: 960 Limited ASX 100 listed Established in 1985 $48.8 billion FUM Life Largest annuity provider in Australia APRA regulated life company An infographic-style snapshot of and retirement concepts. CG code: 966 Term annuities Fixed term annuities product flyer A summary of the features of term annuities. Aged care what you need to know Aged care what you need to know An unbranded brochure explaining the process of entering aged care. Regular income and capital security guaranteed CG code: 745 CG code: 873 Lifetime annuities Lifetime annuities product flyer A summary of the features of lifetime annuities. Regular and secure income for life CG code: 746 Care Care Annuity product flyer Annuity A summary of the features of the Care Annuity. Helping you manage aged care fees CG code: 838 Adviser support tools
Calculators Webcasts and animation Aged care calculator Includes an investment analyser and aged care fee calculator to compare strategies. Age Pension calculator Calculator to help you work out your client s Age Pension entitlements. Income layering webcasts Educational webcasts on the income layering strategy, including a case study. Aged care webcasts Educational webcasts on aged care advice decision points. Retirement calculator A tool to help illustrate the impact of using an annuity as part of a client s retirement portfolio. Moshe Milevsky webcasts Interview with Moshe Milevsky, one of the most sought-after speakers on issues related to investing in retirement. For advisers and clients. Animations A series of animations for investors explaining retirement income concepts. Investor case studies Real investors discussing their lives in retirement and how they have used annuities to replace their salaries. Adviser case study An adviser s views on the value of financial advice and the role annuities play in portfolio construction. Adviser Publication support Name tools 5
Current as at 20 March 2014 Adviser use only July 2013 Adviser use only July 2013 Adviser use only How will you fund your essential living costs? The numbers in the table indicate how much it could cost to fund either a modest or a comfortable standard of living in the post-work years. Have you thought about how much income you need to support the lifestyle you want in retirement, and where this income will come from? The Age Pension could be one source, but will it be enough? ASFA Expenses ASFA Your expenses Modest 1 Comfortable1 Housing ongoing only $59.40 $83.14 $ Energy $54.64 $56.62 $ Food $153.92 $191.07 $ Clothing $29.15 $58.30 $ Household goods and services $35.54 $86.37 $ Health $74.89 $135.87 $ Transport $96.29 $142.20 $ Leisure $105.83 $295.00 $ Communications $16.61 $33.19 $ Total per week $626.27 $1,081.76 $ Total annual expenses $32,656 $56,406 $ A Annual Age Pension Up to $32,416.80 $ 2 B Income shortfall (A B) $ C To make up the income This list covers your essentials only. shortfall of Will you need additional income for $ (insert C) things like holidays, meals out, and you would need to invest unforeseen costs? $ in a lifetime annuity 1 According to the ASFA Retirement Standard June 2013 quarter, this is the annual budget needed by Australians to fund either a modest or comfortable standard of living in post-work years. Refer to the ASFA website www.superannuation.asn.au 2 This is the maximum payment rate of the Age Pension for a couple applying from 20 September 2013 19 March 2014. Your rate depends on your income, assets and other circumstances. This information is current as at 20 September 2013 unless otherwise specified and is provided by Life Company Limited ABN 44 072 486 938, AFSL 234670 () which issues annuities. It is intended to be general information only and not financial product advice and has been prepared without taking into account any person s objectives, financial situation or needs. Investors should consider the current product disclosure statement for the applicable annuity available at www.challenger.com.au and the appropriateness of the annuity (including any risks) to their circumstances before making any investment decision. For Adviser use only April 2014 Lifetime annuities and the Age Pension Around 68% of eligible Australians receive a full or part Age Pension 1, making it an important source of income in retirement. Strategies that help maximise Age Pension entitlements play a key role in retirement planning as they can increase a retiree s cash flow or reduce the amount they need to draw from their own financial assets. In this article, we consider how lifetime annuities can help enhance your client s Age Pension entitlements while also providing income certainty in retirement. The interaction between the Assets and Income Test It is essential to understand the Income and Assets Tests and their implications for your Our updated client s Age Pension entitlements. Age Pension calculator can help As at 20 March 2014: you project your The maximum Age Pension was $842.80 per fortnight for singles and $1,270.60 clients estimated per fortnight for couples. Age Pension The Income Test reduces the Age Pension by $0.50 per fortnight for each dollar earned entitlements over above: the next 15 years, or see if a lifetime Singles: $156 per fortnight annuity may increase Couples: $276 per fortnight combined their Age Pension The Assets Test reduces the Age Pension by $1.50 per fortnight for each $1,000 of assets entitlements. Visit held above: AdviserOnline for access. Homeowners Non-homeowners Singles $196,750 $339,250 Couples $279,000 $421,500 1 The same rates and thresholds apply for the Service Pension payable by the Department of Veterans Affairs (DVA). Life Expectancy (2005 2007 Life Tables 13 ) (Pension purchased from 1/1/10) Age M F Age M F 40 40.71 44.70 41 39.77 43.73 42 38.83 42.77 43 37.89 41.81 44 36.96 40.85 45 36.03 39.90 46 35.10 38.95 47 34.18 38.00 48 33.26 37.05 49 32.34 36.11 50 31.43 35.17 51 30.53 34.24 52 29.63 33.31 53 28.73 32.38 54 27.84 31.45 55 26.95 30.53 56 26.08 29.61 57 25.20 28.70 58 24.34 27.79 59 23.48 26.89 60 22.63 26.00 61 21.79 25.11 62 20.96 24.23 63 20.14 23.35 64 19.34 22.48 65 18.54 21.62 66 17.76 20.76 67 16.99 19.92 68 16.24 19.08 69 15.49 18.24 71 14.04 16.61 72 13.33 15.82 73 12.64 15.03 74 11.96 14.27 75 11.31 13.51 76 10.68 12.78 77 10.07 12.05 78 9.48 11.35 79 8.92 10.67 80 8.38 10.01 81 7.86 9.37 82 7.36 8.75 83 6.89 8.17 84 6.45 7.61 85 6.03 7.08 86 5.64 6.58 87 5.27 6.11 88 4.94 5.68 89 4.63 5.28 90 4.36 4.91 91 4.11 4.57 92 3.89 4.27 93 3.69 3.99 94 3.51 3.75 95 3.36 3.53 96 3.22 3.33 97 3.10 3.16 98 2.99 3.00 99 2.90 2.86 100 2.81 2.74 70 14.76 17.42 Account-based pension Minimum drawdown 14 Age % of account balance Under 65 4% 65-74 5% 75-79 6% 80-84 7% 85-89 9% 90-94 11% 95+ 14% 13 These tables are for technical calculations only. They underestimate actual life expectancy as they are historic statistics and do not take into account mortality improvements. 14 A maximum limit of 10% of the account balance applies to transition to retirement pensions. Age pension rates (20 March 2013 19 September 2013) Fortnightly Annual Single $808.40 $21,018.40 Couple combined $1,218.80 $31,688.80 Illness separated combined $1,616.80 $42,036.80 Includes Pension and Clean Energy Supplement. Pension Assets Test (1 July 2013 19 September 2013) For full pension Disqualifying /allowance asset limits Homeowners Single $196,750 $735,750 Couple combined $279,000 $1,092,000 Illness separated $279,000 $1,357,000 Non-homeowners Single $339,250 $878,250 Couple combined $421,500 $1,234,500 Illness separated $421,500 $1,499,500 Pension Income Test (1 July 2013 19 September 2013) For full pension Disqualifying income limits Fortnightly Annual Fortnightly Annual Single $156.00 $4,056.00 $1,772.80 $46,092.80 Couple combined $276.00 $7,176.00 $2,713.60 $70,553.60 Illness separated $276.00 $7,176.00 $3,509.60 $91,249.60 Deeming thresholds and rates Single Rate Couple First $46,600 2.5% First $77,400 Over $46,600 4% Over $77,400 Age Pension qualifying age Year born Age 1 January 1949 to 30 June 1952 65 1 July 1952 to 31 December 1953 65.5 1 January 1954 to 10 June 1955 66 1 July 1955 to 31 December 1956 66.5 On or after 1 January 1957 67 Per day Basic daily care fee Standard resident $44.54 Protected resident $40.61 Phased resident $44.54 Non-standard resident $50.57 Daily income-tested fee Maximum $70.74 Singles (daily rate) (Total fortnightly income $918.10 15 ) x 5/12/14 Couples (daily rate) (Total fortnightly income $1,800.20 16 ) x 5/12/14/2 Accommodation bond (hostels/extra services places) (From 20 March 2013) Minimum assets after paying bond $43,000 Annual retention amount $3,972 Interest charge on periodic payment 6.82% 17 Accommodation charge (Nursing homes) Individual total assets Max daily charge Up to $43,000 Nil $43,000 to $112,243.20 (Assets $43,000)/2,080 Above $112,243.20 $33.29 15 For protected residents use $789.30. For phased residents use $918.10. 16 For protected residents use $1,542.60. For phased residents use $1,800.20. 17 From 1 July 2013 to 30 September 2013. Level 15, 255 Pitt Street Level 19 Sydney NSW 2000 31 Queen Street telephone 02 9994 7000 Melbourne VIC 3000 facsimile 02 9994 7777 telephone 02 9994 7000 Level 9 facsimile 02 9994 7777 241 Adelaide Street Level 2 Brisbane QLD 4000 168 St Georges Terrace telephone 07 3136 5400 Perth WA 6000 facsimile 07 3136 5407 telephone 08 9261 7412 Level 7, Suite 714 facsimile 08 9321 5277 147 Pirie Street Adelaide SA 5000 telephone 08 7071 7042 facsimile 08 8227 0395 Investor Services 13 35 66 Adviser Services 1800 621 009 www.challenger.com.au Sources: Department of Health and Ageing www.health.gov.au Australian Taxation Office www.ato.gov.au Centrelink www.centrelink.gov.au This information is based on current law at the time of writing and is current as at 1 July 2013. The facts and figures may change at any time. Life Company Limited ABN 44 072 486 938 AFSL 234670 () does not take any responsibility for any error or omission, or for any loss arising from its use. is not authorised or licensed to provide tax or social security advice. This Ready Reckoner has been prepared solely for licensed financial advisers. It is general information only and is not intended as advice. It must not be passed on to a retail client. Any information provided or conclusions made, whether express or implied, do not take into account the investment objectives, financial situation and particular needs of an investor. Because of that, each person should, before acting on any such information consider the appropriateness of the information having regard to their objectives, financial situation and needs. Because this is a complex area, each person is strongly recommended to obtain relevant professional financial, taxation and social security advice. Issuer: Life Company Limited ABN 44 072 486 938 AFSL 234670. 15566/CG083/0713 For advisers At we want to provide the best possible Q. How is the money I invest in an annuity used? support, so we have come up with the answers to some A. When your client buys a annuity, their common questions about annuities which your clients money is pooled with money from other investors along may ask you. with additional money from the group. Life is required by law to keep this money Q. What is an annuity? separate from other funds in the Group, in A. An annuity is a secure investment that provides your what is known as a statutory fund. client with a series of regular payments, either for a The statutory fund primarily invests in fixed income chosen term or for their lifetime, in return for a lumpsum investment. It can be used with other retirement (including cash), with some investments in commercial property, infrastructure and a very small amount in listed investments, like account-based pensions, to set your shares. The statutory fund is invested with the aim of client up with a dependable income that can last achieving stable returns to generate reliable cash flows throughout their retirement. that are sufficient to meet payments to all investors. Q. What are the benefits of having an annuity? Life is required to comply with APRA s capital A. An annuity benefits include: adequacy standards to help ensure that obligations can regular payments in return for a lump-sum investment be met. Life holds more assets in the statutory competitive earning rates fixed at the start of the fund than the APRA minimum. investment Q. Can I withdraw the annuity before the end of fixed terms from one to 50 years, or for the client s the investment term? lifetime A. Yes. If your client wants to withdraw from their regular payments made monthly, quarterly, half-yearly annuity before the end of the term, they may receive back or yearly an amount less than the amount they originally invested, guaranteed regular payments regardless of share even after taking into account any payments they ve market movements already received. no management fees generally tax-free payments for those aged 60 or over Q. What happens to my annuity if I die before the if bought with superannuation money term is up? can be tailored to provide benefits for your client s A. For a fixed term annuity, your client s estate or spouse or another dependant beneficiaries generally have the option to either continue can maximise Centrelink entitlements. to receive payments until the end of the term or withdraw the annuity and have it paid as a lump sum. The Q. How safe are annuities? withdrawal value may be less than the original amount A. Life is regulated under the Life Insurance invested, even after taking into account any payments Act 1995, which governs the provision of annuities in already received. Australia. Under this Act, Life is subject to With s Lifetime Annuity, a withdrawal value is prudential regulation by APRA, which actively supervises only available for the first 15 years of the annuity term. all Australian life companies to help ensure they are able For the Care Annuity, a withdrawal value is only available to meet their obligations to investors. If the money in for the first 10 years of the annuity term. the Statutory fund falls below the level required to make payments to investors, Life is required to top it up. Other items Technical guide: Lifetime and Term Annuities Care Annuity Adviser guide Technical guide: Lifetime and Term Annuities Superannuation Social security Aged care Contacts Guide covering the technical benefits of Lifetime and Term Annuities including Centrelink and taxation treatment. CG code: 969 Care Annuity technical guide A guide to the Centrelink and taxation of the Care Annuity. CG code: 950 1 July 2013 Ready Reckoner Frequently asked questions Ready Reckoner Quick reference guide on the latest tax rates, Centrelink thresholds, superannuation contributions and taxes, life tables and aged care information. CG code: 083 Frequently asked questions The answers to some common questions about annuities which your clients may ask you. CG code: 984 Aged care guide Retirement budget planner for couples Aged care adviser guide A comprehensive guide to aged care rules and regulations including case studies and strategies. CG code: 953 Retirement budget planners Budget planners to work out a client s living costs in retirement. Sign up to News for up-to-date news on s products, industry changes and the availability of new adviser tools. 15718/0913 Tech Tech articles Technical articles covering a number of topics, including Centrelink/DVA treatment of annuities and aged care reforms. Adviser support tools
Order form PLEASE USE BLOCK LETTERS TO COMPLETE THIS FORM To receive more information on our key products and services, please complete this form by nominating the number of brochures you require. Please complete and Fax to: Post to: Email to: challengerfulfillmen@challenger.com.au Attention: Bianca Rice Attention: Bianca Rice Fax No: (02) 9994 7777 GPO Box 3698 Phone: Sydney NSW 2001 1800 621 009 Brochureware Guide to annuities CG code: 760 Annuities at a glance flyer CG code: 963 About Life brochure CG code: 960 Fixed term annuities product flyer CG code: 745 Lifetime Annuities product flyer CG code: 746 Care Annuity product flyer CG code: 838 Setting up a secure retirement income case study CG code: 828 Managing aged care fees case study CG Code: 827 Retirement Specialists CG code: 966 Aged care what you need to know flyer CG code: 873 Product disclosure statements Guaranteed Annuity CG code: 695 Guaranteed Annuity (Liquid Lifetime) CG code: 721 Care Annuity CG code: 856 Guaranteed Personal Superannuation CG code: 930 Guaranteed Allocated Pension CG code: 475 Other items Technical guide: Lifetime and Term Annuities CG code: 969 Technical guide: Care Annuity CG code: 950 Aged care adviser guide CG code: 953 Ready Reckoner CG code: 083 Frequently asked questions CG code: 984 Annual Report 2013 CG code: 877 Please forward to: Name Company Address Suburb State Postcode Phone Fax Email 17131/0714 Alternatively, download a copy of the relevant brochure or product disclosure statement (PDS) from www.challenger.com.au
New South Wales Level 15 255 Pitt Street Sydney NSW 2000 Telephone 02 9994 7000 Facsimile 02 9994 7777 Victoria Level 19 31 Queen Street Melbourne VIC 3000 Telephone 02 9994 7000 Facsimile 02 9994 7777 Queensland Level 9 241 Adelaide Street Brisbane QLD 4000 Telephone 07 3136 5400 Facsimile 07 3136 5407 Western Australia Level 5 50 St Georges Tce Perth WA 6000 Telephone 08 9261 7412 Facsimile 08 9321 5277 South Australia Level 7 147 Pirie Street Adelaide SA 5000 Telephone 08 7071 7042 Facsimile 08 8227 0395 Investor Services 13 35 66 Adviser Services 1800 621 009 www.challenger.com.au 16847/CG980/0714