Annuities

What are annuities?

An annuity is a simple, secure financial product that guarantees a series of payments in return for an upfront investment. The capital can be returned at the end of the agreed term or gradually during the term of the annuity.

The rate of return is fixed at the outset, regardless of share market movements or interest rate fluctuations. Annuities provide the comfort of knowing you will receive a pre-agreed, guaranteed income stream for a specific period of time.

Annuities can only be issued by life insurance companies. In Australia they are strictly regulated by the Australian Prudential Regulation Authority (APRA).

Benefits of annuities

The beauty of annuities is that everything is 'locked in' at the start of the investment. You know what to expect every month or every year for the life of your investment. Other benefits include:

Security - your interest and capital payments can be guaranteed, regardless of how the share market and how other investment markets perform.

No product fees - there are no management or account keeping fees. The rate of return and the amount of income to be paid each period are agreed upfront and there are no fees to be taken out of these amounts.

Flexibility - you can choose the term of the annuity, the frequency in which you receive payments or whether you receive your capital back in a lump sum at the end or over the course of the annuity.

Ability to remove inflation risk - you can also elect to index your payments so they move in line with inflation (CPI) or fixed indexation.

Tax effectiveness - if bought with superannuation monies, and if minimum payment requirements are met, income from annuities will be tax free for investors over the age of 60.

Lifetime income - in the case of a lifetime annuity you can enjoy a guaranteed regular income for your lifetime.

Attractive rate of return - annuities offer highly competitive earning rates compared to many other fixed income investments.

Any information contained in this publication is current as at February 2011 and is provided by Challenger Life Company Limited ABN 44 072 486 938 AFSL 234670, the issuer of all Challenger annuities, Challenger Retirement Services Pty Ltd ABN 80 115 534 453 AFSL 295642, the issuer of Challenger's superannuation and allocated pensions or Challenger Managed Investments Limited ABN 94 002 835 592 AFSL 234668, the issuer of units in the Challenger Guaranteed Income Fund ARSN 139 607 122. It should be regarded as general information only rather than 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 product and consider that Statement before making any decision about the product. A copy of the relevant PDS can be obtained from your financial adviser, our Investor Services team on 13 35 66, or on our website.
If you acquire or hold the product, we and/or the Challenger group of companies will receive fees and other benefits which are generally disclosed in the PDS or other disclosure document for the product. We and/or the Challenger group of companies and our respective employees do not receive any specific remuneration for any advice provided to you. However, financial advisers (including some Challenger group companies) may receive fees or commissions if they provide advice to you or arrange for you to invest in the product. Challenger Life Company Limited, Challenger Managed Investments Limited, Challenger Retirement Services Pty Ltd, some or all of Challenger group companies and directors of those companies may benefit from fees, commissions and other benefits received by another group company.