- 60% of the purchase price of a lifetime annuity is assessed as an asset until aged 84*, or for a minimum of 5 years, then the annuity’s assessable value falls to 30%. This means investing $100,000 in a lifetime annuity reduces assessable assets by $40,000 immediately.
- Through this strategy, a lifetime annuity could increase your clients’ Age Pension by $3,120 in the first year.
- Your clients would also receive a guaranteed income stream for life (which some of the other asset reducing strategies do not provide) with a range of payment indexation options.
Case study: Income for life with a bonus
Marianne and Geoff have recently retired. They’re looking forward to a drama-free retirement after long careers working in theatre. The couple estimated they’d need about $60,000 income p.a. for a relaxed retirement, or what they call “Act II”.
They own their home and have $600,000 in super, $30,000 in personal assets, $50,000 in the bank. They were receiving $15,291 p.a. in Age Pension and realised they’d need at least $45,000 p.a. to meet their basic living expenses. They anticipate that their desired lifestyle will cost them $60,000 pa. After speaking to their financial adviser, they moved 30% ($180,000) of their super into a lifetime annuity.
This reduced their assessable assets by $72,000 and boosted their pension by 37% ($5,616) in the first year to $20,907. Together, their lifetime annuity, Account Based Pension, Age Pension and some cash in the bank, deliver the $60,000 budget they aimed for in their first year of retirement.
Marianne and Geoff are fit and healthy. Having some guaranteed income for life, regardless of market ups and down, is very appealing – giving them more confidence to enjoy life.