What is an Annuity? How Does it Help Retirement Planning

Q: Who can invest in an annuity?

Anyone aged 18 years and older can invest in an annuity, although if you are using your super to invest, you must be aged 61 or over and have unrestricted access to your super. There is a minimum investment amount of $10,000.

Q: Are annuities tax free?

For annuities purchased with superannuation money, income payments and lump sum withdrawals are generally tax-free if you are age 61 or over. For annuities purchased with your retirement savings (outside super), income payments and lump sum withdrawals may have some taxable income. Challenger provides an annual PAYG statement which has all the details you need to complete your tax return. For tax treatment of death benefits see the FAQ ‘Are annuities taxable to beneficiaries?’.

Q: Are annuities taxable to beneficiaries

For annuities purchased with superannuation money, if a death benefit is paid to a dependant (as defined in law), for example a spouse or child under 18, it will be paid tax-free. However, if paid to a non-dependant, for example adult children, they may have some tax payable. Find out more about tax on super death benefits. For annuities purchased with money from your savings outside superannuation, death benefits may have some tax payable. Challenger provides a PAYG statement which has all the details you need to do your tax return as a beneficiary.

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Annuities explained

An annuity gives you a guaranteed regular income for life, or for a term you choose.

How does an annuity work?

If you’re 18 years and older you can use your personal savings to invest in an annuity. If you’re using some of your super to invest, you must be aged 60 or over and have unrestricted access to your super.

Choose how long you want to invest

You can choose an annuity that provides income for your lifetime, or you can choose to invest for a fixed term.

Invest a lump sum

You can invest some of your super or savings with Challenger.

Receive guaranteed regular payments

We pay you guaranteed regular payments for as long as you live, or for the period you choose.

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Types of annuities

Challenger offers two types of annuities, Lifetime and Fixed term.

	Challenger Lifetime Annuity (Liquid Lifetime)	Challenger Guaranteed Annuity (Fixed Term Direct)
What it delivers	Delivers guaranteed regular income payable for life, regardless of how long you live	Delivers guaranteed income payable for a fixed period you choose
Income	Guaranteed regular income for life; and your spouse’s life if you choose	Regular income for a fixed term
Term	The entire lifetime of the policy holder	1 to 5 years
Payment options	Fixed payment amounts, or payments linked to CPI, or payments inked to RBA cash rate, or market linked	Fixed payments
Payment frequency	Monthly	Monthly or yearly payments for terms over one year
Lump sum access	Available during a withdrawal period based on life expectancy	Initial investment repaid at the end of the term. Fees will apply for withdrawal before the end of the term
Death benefit	Lump sum payable to estate or beneficiaries during a period based on life expectancy	Not specified
Tax benefits	Tax-free payments if invested with super money	Not specified
Minimum investment amount	$10,000	$10,000 Can only use non-superannuation savings to invest
Additional options	Index options (for market linked payments) Deferred payment option Accelerated payment option	Longer terms, and the ability to invest with super monies are available through our Challenger Guaranteed Annuity (Fixed Term)
Read important information: This table is a brief summary only. Full information on product features is available in the PDS	View the PDS View the TMD	View the PDS View the TMD

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Why consider a Lifetime annuity?

Retirement is life-changing. As you adjust to your new lifestyle, you’ll need to think differently about your finances. Moving from earning an income to drawing on your retirement savings can be a big shift mentally. And it can bring up financial concerns you haven’t thought too much about before, such as:

the risk of outliving your retirement savings and becoming completely reliant on the Age Pension
the impact of market conditions on the value of your investments during your retirement
the risk that over time inflation can increase your cost of living. This means the income received from your investments may also need to increase in line with inflation to maintain your standard of living.

Lifetime annuities can help to address these concerns so you can relax and enjoy your retirement.

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Features of Challenger's lifetime annuity

Watch our explainer video

Make your retirement income last

Challenger’s Lifetime Annuity' (Liquid Lifetime) will pay you a guaranteed regular income for life, helping to give peace of mind in retirement.

Helping you to spend confidently in retirement

Annuities can be used to help cover your living costs and maintain your standard of living in retirement.

Protection against key retirement risks

Lifetime annuities give you an additional layer of protection for life. They can act as a safety net.

Potential to get a boost to your Age Pension

Access an immediate Age Pension boost if you are an asset tested part pensioner, because only 60% of the amount invested into a Challenger lifetime annuity counts towards the relevant Centrelink/DVA assets test.

A guaranteed death benefit

A guaranteed death benefit is payable for the duration of your life expectancy, up to a maximum of 27 years. The death benefit equals 100% of the amount invested for the first half of the death benefit period (rounded down to a whole year) and we don’t reduce the death benefit for any income that has already been paid to you.

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Why consider a term annuity?

Challenger’s Fixed term annuity is a secure investment offered by a life insurance company that operates in a similar way to a term deposit². Payments are guaranteed by Challenger regardless of how investment markets perform.

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Features of Challenger's term annuity

Watch our explainer video

Fixed return

Know what you’re earning. Enjoy the certainty that your income won’t be impacted by the performance of the share market.

Choice of terms and payment

Select from a range of terms and income payment options all delivering guaranteed payments for the term you choose.

Nominate beneficiaries

Keep control over your estate planning by nominating one or more beneficiaries.

Competitive rates

View our competitive rates here.

No fees

There are no fees or charges payable to us.

Access your investment early if you need it

If your circumstances change, you can access a lump sum amount early. Bear in mind that a Challenger fixed term annuity is designed to be held until the end of the term. If you decide to withdraw early, a penalty will apply.

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Frequently asked questions

We have compiled a list of questions our customers ask us about annuities. We have shown the most common questions, you can also view all frequently asked questions.

Who can invest in an annuity?

Are annuities tax free?

Are annuities taxable to beneficiaries

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1. You can ask us to remove these features in return for higher starting payments. But the choice is totally yours.

2. Annuities are not covered by the Australian Government’s Financial Claims Scheme, which protects certain types of deposits if a bank, building society or credit union fails.

Table of Contents

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Annuities explained

How does an annuity work?

Choose how long you want to invest

Invest a lump sum

Receive guaranteed regular payments

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Types of annuities

Challenger Lifetime Annuity(Liquid Lifetime)

Challenger Guaranteed Annuity(Fixed Term Direct)

This table is a brief summary only. Full information on product features is available in the PDS

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Why consider a Lifetime annuity?

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Features of Challenger's lifetime annuity

Make your retirement income last

Helping you to spend confidently in retirement

Protection against key retirement risks

Potential to get a boost to your Age Pension

A guaranteed death benefit

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Why consider a term annuity?

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Features of Challenger's term annuity

Fixed return

Choice of terms and payment

Nominate beneficiaries

Competitive rates

No fees

Access your investment early if you need it

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Frequently asked questions

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1. You can ask us to remove these features in return for higher starting payments. But the choice is totally yours.

2. Annuities are not covered by the Australian Government’s Financial Claims Scheme, which protects certain types of deposits if a bank, building society or credit union fails.

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Table of Contents

Choose how long you want to invest

Invest a lump sum

Receive guaranteed regular payments

Challenger Lifetime Annuity(Liquid Lifetime)

Challenger Guaranteed Annuity(Fixed Term Direct)

This table is a brief summary only. Full information on product features is available in the PDS

Why consider a Lifetime annuity?

Features of Challenger's lifetime annuity

Make your retirement income last

Helping you to spend confidently in retirement

Protection against key retirement risks

Potential to get a boost to your Age Pension

A guaranteed death benefit

Why consider a term annuity?

Features of Challenger's term annuity

Fixed return

Choice of terms and payment

Nominate beneficiaries

Competitive rates

No fees

Access your investment early if you need it

Challenger Lifetime Annuity
(Liquid Lifetime)

Challenger Guaranteed Annuity
(Fixed Term Direct)

Challenger Lifetime Annuity
(Liquid Lifetime)

Challenger Guaranteed Annuity
(Fixed Term Direct)