Challenger Lifetime annuities Regular and secure income for life
Challenger Lifetime annuities A Challenger lifetime annuity is a secure investment that protects your savings and can provide an income for life. It can be used with other retirement investments, like account-based pensions, to set you up with a dependable income that can last throughout your retirement. Just like many other investments, you buy a lifetime annuity with an initial capital amount. You choose the frequency of the regular payments to you (e.g. monthly, quarterly, half-yearly or yearly), whether your payments will be indexed (increased annually) and the amount by which those payments will be indexed. Challenger then guarantees your regular payments and you start to receive them (Figure 1). Features The features of the Challenger Guaranteed Annuity (Liquid Lifetime) are set out below. An income that can last for life A Challenger lifetime annuity gives you a regular income that can last for your lifetime (unless you withdraw early). We guarantee to make your regular payments, even if you live longer than expected. The initial dollar value of your regular payments is determined at the time you buy the annuity and will depend on a number of factors, including your initial capital investment, prevailing market rates, the options you choose (for example, which indexation option you select) and your life expectancy at the time you buy the annuity. If you choose a reversionary, or buy the annuity jointly with a second person, and that person survives you, regular payments continue to be made to that person after your death. Ability to enhance your Age Pension If you are eligible for the Age Pension, a Challenger lifetime annuity may help increase your Age Pension. Under the current Centrelink Income Test, part of the income from the annuity is treated as the return of capital (this is called the deduction amount ) and is therefore not assessed. Under the current Assets Test, the annuity has a reducing asset value. If you are eligible for the Age Pension, this could mean more Age Pension for you (and your spouse). Access to your capital A Challenger lifetime annuity has a withdrawal period of 15 years. If your circumstances change, or if you simply change your mind, you can withdraw your money within 15 years of the start of the annuity. If you choose to withdraw voluntarily, we will pay the lump sum to you. If you want to withdraw on the 15th anniversary of the start of your annuity, we guarantee the percentage that will be returned to you. If you die during the first 15 years without a reversionary or joint owner, we will pay an amount at least equal to your withdrawal guarantee to your estate.
You can waive your right to withdraw voluntarily within the first 15 years, in return for higher regular payments. If you choose this, a withdrawal value is only payable on death within the first 15 years. You may also increase the regular payment amount by reducing the standard withdrawal guarantee percentage. After the end of the 15 year withdrawal period your annuity ceases to have a withdrawal value and no lump sum is payable on your death and you cannot voluntarily withdraw. It s also important to remember that the annuity is designed to be held for life so if you withdraw your money during the 15 year withdrawal period, you may receive an amount less than the initial capital you used to buy the annuity, even after taking into account the payments that have been made to you. No Challenger fees We do not deduct a management fee from the investment return, from your regular payments, or from your capital. Our costs are taken into account when setting the amount of your regular payments. You can, however, agree to the payment of adviser service fees with your financial adviser and authorise us to pay those fees to the Australian Financial Services Licensee who supervises your financial adviser (or your financial adviser directly if they are the licensee). Where you do so, the amount of your regular payments is reduced accordingly. Protection against share market volatility A Challenger lifetime annuity creates a regular cash flow for life (unless you withdraw early), regardless of how long you live or how investment markets perform, giving you greater peace of mind during your retirement. Inflation protection If you choose a full or partial indexation option, your Challenger lifetime annuity can also help protect you from inflation eroding the purchasing power of your regular payments. Figure 1: A lifetime annuity can be tailored to give you a dependable income for life You select your payment options, such as the amount of indexation and payment frequency, then buy the annuity You start to receive your regular payments
A Challenger lifetime annuity can be used as part of your retirement investment strategy If you are eligible for the Age Pension, a Challenger lifetime annuity can be used to supplement it, helping to secure an income for life. Because you ll generally know just how much income you will receive year-to-year from the Age Pension and annuity, you may wish to consider using this income to pay for the expenses that you can expect your essential costs of living, like food and utilities. Income from your remaining investments, such as account based pensions, cash, term deposits or term annuities, can then be used to pay for the things you desire, but don t necessarily need (Figure 2). See our Setting up a secure retirement income case study available at www.challenger.com.au for more on how a Challenger lifetime annuity can be used alongside other types of investments to secure an income in retirement. Other considerations Your financial adviser can help you think about: your budget in retirement, including how to identify essential costs and desirable costs how to structure your investments so that you ll have a secure income to pay for the essentials whether you can improve your social security entitlements by using different investments. For more information, contact your financial adviser. Figure 2: Income from different sources can be matched to different expenses 1 Income to pay for desirables Other 2 Account-based pension For things like: holidays meals out entertainment home repairs other unforeseen costs emergencies Income to pay for essentials Lifetime annuity Age Pension For things like: food clothing utilities health expenses 1 Diagram is illustrative only and is not to scale. 2 Can include other income sources like term annuities, term deposits and cash.
About Challenger Life Challenger Life Company Limited (Challenger Life) is the issuer of the Challenger Guaranteed Annuity (Liquid Lifetime) and term annuities. Challenger Life is part of the Challenger Limited group, specialising in providing Australians with financial security in retirement. It offers award-winning annuities, allocated pensions and superannuation products. In 2014 Challenger Life was named winner of the AFA/Plan for Life Annuity Provider of the Year for the sixth year in a row. These awards are issued by AFA (Association of Financial Advisers) and Plan for Life Actuaries and Researchers, and recognise life insurance company excellence in the provision of products and services to financial advisers and their clients. For further information about these awards, refer to the AFA website. Challenger Life is supervised by the Australian Prudential Regulation Authority (APRA). Challenger s lifetime annuity product, the Challenger Guaranteed Annuity (Liquid Lifetime) can help provide: a regular income that can last for life an increase in the Age Pension for those who are eligible protection from share market volatility inflation protection options. Risks of investing in Challenger lifetime annuities As with all investments, annuities carry some risks. These risks include the risk of locking up your money for an extended period of time, potentially receiving less back than the amount originally invested if you terminate the annuity early and the risk that the provider is not able to meet the payments under the annuity when they are due. If you make the decision to terminate the annuity early, you may affect your social security benefits or have tax consequences. The key risks and how they are managed are described in the product disclosure statement (PDS) for the relevant annuity. Therefore, before deciding to invest in an annuity you should read the PDS (including the information about significant risks) and consider the suitability of the annuity to your circumstances. Today, Challenger Life is responsible for managing the assets of over 63,000 people in Australia. If you d like to know more about Challenger Life or Challenger lifetime annuities, visit www.challenger.com.au or call the Challenger Investor Services team on 13 35 66.
Adviser contact details The information contained in this publication is current as at 20 October 2014 unless otherwise specified and is provided by Challenger Life Company Limited ABN 44 072 486 938 AFSL 234670 (Challenger Life), the issuer of the Challenger Guaranteed Annuity (Liquid Lifetime) and term annuities. It should be regarded as general information only rather than personal financial product advice. It has been prepared without taking account of any person s objectives, financial situation or needs. Because of that, each person should, before acting on any such information, consider its appropriateness, having regard to their objectives, financial situation and needs. Each person should obtain a product disclosure statement (PDS) relating to the Challenger Guaranteed Annuity (Liquid Lifetime) or other relevant annuity product and consider that PDS before making any decision about the product. A copy of the PDS for the Challenger Guaranteed Annuity (Liquid Lifetime) or any of the term annuities it issues can be obtained from your financial adviser, our Investor Services team on 13 35 66, or at www.challenger.com.au. We and our employees do not receive any specific remuneration for any advice provided to you. However, financial advisers may receive fees if they provide advice to you or arrange for you to invest with us. Some or all of the Challenger group companies and their directors may benefit from fees and other benefits received by another group company. The references to guaranteed regular payments in this publication are references to the contractual obligations of Challenger Life under the terms of the applicable annuity to make these payments. The payment obligations of Challenger Life are subject to the terms and conditions of the relevant annuity and the Life Insurance Act, including any changes to the relevant laws (for example, taxation laws) that apply to life insurance companies and annuities. Challenger Life s ability to meet these obligations is dependent on the assets it holds from time-to-time to support these obligations and on capital support held in accordance with APRA s capital adequacy standards. Neither the Challenger Group nor any company within the Challenger Group guarantees the performance of Challenger Life s obligations or assumes any obligations in respect of annuities issued by Challenger Life. Challenger Life is not licensed or authorised to provide tax or social security advice. We strongly recommend that you seek professional taxation and social security advice for your individual circumstances. www.challenger.com.au 17027/CG746/1114 Challenger Limited Level 15 255 Pitt Street Sydney NSW 2000 Telephone 02 9994 7000 Facsimile 02 9994 7777