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Annuities

Annuities can be an ideal solution for investors looking for a safe and reliable investment that pays regular income. Because their returns are fixed and don't fluctuate with movements in either the share or bond markets, they may be particularly suited to the fixed income or fixed interest part of an investment or retirement portfolio.

This very short narrated animation explains how annuities work - please ensure your sound is switched on:

*Challenger Life Company Limited, approximately $8 billion assets under management as at 30 September 2011

An annuity is a secure, reliable investment that can be individually tailored to pay an investor a regular amount of their choosing.

The terms of an annuity are agreed in a contract between an investor and a prudentially regulated life insurance company.

In exchange for a one-off initial investment, the investor is regularly paid a fixed level of income for an agreed period of time. Income payments can consist of interest only, with 100% of capital repaid at the end of the agreed term, or can consist of a combination of principal and interest.

Income may be paid monthly, quarterly, half yearly or annually and an annuity can be purchased for terms from one year, to 50 years, or for the rest of an investor's lifetime. 

Annuities are often used in retirement investing, to provide an investor with a fixed payment or regular income.

Annuities have been used since Roman times, but became more popular following the Great Depression of the 1930s. After the stock market crash of 1929, many people were worried about the risks of share ownership and the stability of financial markets, so they purchased financial products from life insurance companies, which were seen to be more stable institutions.

Today annuities can still only be issued by life insurance companies. In Australia this is controlled by the Life Insurance Act 1995 and regulated by the Australian Prudential Regulation Authority (APRA). 

For further information about annuities, visit the What are annuities page.

Challenger - a leader in annuities

Challenger is Australia's largest provider of annuities and a leading provider of retirement income products. Challenger's APRA-regulated life company invests over $8 billion to generate secure investment returns for around 60,000 customers.

Visit the Why Challenger page for more information about Challenger.

Annuities' role in managing the risks of retirement investing

Annuities are widely regarded by actuaries, academics and retirement finance experts as important products to help manage the key risks of retirement investing, which include inflation, capital market and longevity risks.

The ageing or "greying" of Australia's population presents a major public policy challenge for the future. Challenger has undertaken and commissioned substantial independent research into the important role lifetime annuities can play in reducing the risks of investing in retirement.  

This research has been published in the following submissions to the Australian Government's review of the future tax system (Henry Review):

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.