RIC_Landing page banner_banner_2500x450_v1

Challenger's Group Annuity

Without having the power to predict exactly how long we’ll live, it’s impossible to know how long your members’ retirement income needs to last.

Longevity risk is unique to retirement. Supporting the lifestyle they want and deserve for the rest of their life is a challenge for retirees who don’t know how long they will live. The possibility that retirement savings might be inadequate to sustain the retiree throughout their life, is exacerbated by the overall trend of increasing life expectancy. There are close to 4.2 million Australians over the age of 65, a number that is forecast to increase to 6.7 million by 2040, and 9.3 million by 20601. Solving the longevity problem for all these retirees is difficult to do one at a time.

Longevity risk cannot be addressed with superior investment management, volatility control or strong performance. It is different.

The time is now

APRA estimates that in the next 10 years, 3.6 million Australians will move from the accumulation phase to the retirement phase of superannuation, with somewhere in the region of $750 billion in aggregate retirement savings.2

When the retirement income covenant (RIC) comes into force on 1 July 2022, super trustees are required to formulate a retirement income strategy for their members, improving the financial outcomes for Australian retirees. 

Maximising retirement income over your members’ lifetime needs a solution to longevity risk. No one knows how long they will live, and many members will live beyond life expectancy. They need income for those years.

Super funds have demonstrated capabilities in delivering performance and managing investment and inflation risks. But great investment performance will not solve longevity risk because it is a risk that is specific to each member. Generating higher returns can provide a higher income level for members, but it doesn’t mean that the income will last for their lifetime. A longevity solution will let your members enjoy that higher income level every year, for as long as they live.

Existing approaches to address longevity risk have been limited. The Age Pension is helpful in providing longevity risk management for some members, but the average balance of super fund members in the pension phase is above the threshold to receive a full Age Pension.

Implementing a solution isn’t easy, and the clock is ticking. The internal capability that a fund requires is considerable in terms of operational capacity, asset and liability management.

Income for life

Challenger has a solution to this complex problem, one that can help address the risk of retirees outliving their savings by providing members with income for life.

The Group Annuity is a co-created longevity solution that enables a super fund to issue its own longevity solution with a guaranteed income stream. This solution allows a super fund to retain a direct relationship with members and the group insurance policy is treated as an asset and attributed to the super fund’s AUM.

This back-end solution will help super funds to meet the specific longevity requirements of the RIC.

Request a meeting or call back with a member of our Institutional Partnerships team to find out more about our Group Annuity, below. 


1Retirement Income Review - Final Report, Australian Bureau of Statistics, as at December 2019, 20 November 2020
2Helen Rowell Deputy Chair, APRA, Speech to the Australian Financial Review Super and Wealth Summit, 22 November 2021