The purpose of this strategy is to help you understand your choices regarding your current or future retirement, and to assist you with improving your outcomes throughout your retirement. This is not intended to be financial product advice.

The Challenger Retirement Fund (the Fund) is a superannuation fund which services a specific need for you. The investment objective of the Fund is to provide you with a guaranteed income stream or a guaranteed rate of return so that you can plan for your retirement with certainty.

As all the products in the Fund are closed to new members, you might need to use investments outside the Fund to generate additional income in retirement. The Fund products are not intended to be the sole solution for your retirement strategy. Rather, a combination of income streams may be ideal for assisting you to achieve and balance your retirement objectives.

 

 

Key retirement objectives

The Fund's Retirement Income Strategy aims to assist you to balance and achieve the three key objectives in retirement:

  • maximise your retirement income;
  • manage risk; and
  • allow flexible access to your money.

Maximising retirement income

Income which is sustainable and stable can help you maximise your income throughout your retirement. Sustainable retirement income is income that is reliable and long-lasting. Stable retirement income is income which is constant and predictable each year. So ultimately, the aim is to have income which you can rely on and will be there for the rest of your life.

Managing risks

Consideration should be given in retirement to managing key risks to meeting your retirement income goals, including:

  • Longevity risk – You don't know how long you will live.
    Longevity risk is the risk of outliving your savings. Without the certainty of knowing how many years to plan for, it can be safer to assume you will live well into your 90s. Assuming this will give you a greater chance of having income throughout your retirement, without having to rely solely on the Age Pension. The Age Pension is unlikely to meet most people’s desired income in retirement, beyond their basic needs.
  • Inflation risk Inflation may chip away at the value of your retirement income.
    Inflation is the increasing cost of living over time. Even small increases to the cost of living can have a significant impact on how far your money will go. For example, an average annual inflation rate of 2.5% might see a $3 loaf of bread double in price over a period of 25 years. Without the right strategy in place, increases in inflation over time could mean your retirement income will no longer cover your living costs later in life.
  • Market risk – Later in life you will have less time to recover from market volatility.
    Exposure to growth investments such as shares and property comes with the risk of market volatility. When investments earn negative returns, your retirement savings will usually fall in value. The right strategy can minimise the impact on your savings from market volatility during a 20-30 year+ retirement period.
  • Sequencing risk  Poor returns on investments when your savings are at their peak may have a bigger impact.
    In retirement, timing is everything. If you experience lower than expected returns when you begin drawing an income from your retirement savings, this can significantly affect how long your retirement savings will last to fund your retirement income. That’s why it is important to have an appropriate strategy in place to minimise this risk and help your retirement income last longer.

Flexible access to your money

It is important to consider access to money you can draw on at any time for planned or unexpected expenses. This can help you avoid the need to withdraw from your investments at inopportune times.

 

 

Retirement Income Strategy

A guaranteed lifetime income stream can work alongside an account-based pension

It is unlikely that a single retirement income stream alone will enable you to maximise your retirement income, manage risks and provide flexible access to your money, but a combination of income streams can help you to achieve this.

Two types of income streams which are integral to the Fund’s Retirement Income Strategy are an account-based pension and an inflation-linked lifetime income stream (guaranteed lifetime income stream). The following table compares how each type of income stream helps to address the key retirement objectives.

 
  Account-based pension
Guaranteed lifetime income stream
Regular payments
Yes Yes 
Longevity protection No  Yes
Inflation protection  No – your payments may increase in line with inflation over time, but generally your capital isn’t protected as you are simply just withdrawing more from your balance.
Yes
Protection against market risk
Usually, no
Yes
Easy access to your money/ability to make partial withdrawals
Usually, yes While lifetime income streams are designed to be held for life, some provide a long period where you can access a lump sum if your circumstances change. Partial withdrawals are not generally available.

While the Fund does not have an account-based pension or lifetime income stream open for new investment, you can consider these investments outside of the Fund. You could also consider other types of income streams however they might not help you manage all your retirement objectives.

Income layering

An income layering approach enables you to lock in a minimum baseline income for life while still providing access to your money. This baseline income will be available to help you meet your essential spending needs for life. Any income on top of your baseline income is considered as desired income

An income layering strategy has three core income components:

Graph showing income layering

While the Age Pension is a sustainable, stable and risk-protected income stream, for many retirees it will be a safety-net only – it might not be enough to maintain your desired lifestyle in retirement and might not even cover your essential expenses. To meet your essential expenses throughout retirement, the Age Pension can work together with a secure, lifetime income stream, such as a lifetime annuity, to provide regular, top-up income payments for life. Additionally, a lifetime income stream could help boost your Age Pension today1.

Once your essential expenses have been met through a combination of the Age Pension and a lifetime income stream, you can meet your additional desired expenditure goals with income from an account-based pension. An account-based pension generally provides access to a range of investment options, allows lump-sum withdrawals and gives you the option of changing your income payments (so long as you take the required minimum each year).

An income layering strategy can therefore help you meet the three key retirement objectives:

  • maximising your retirement income;
  • managing risks; and
  • having flexible access to your money.

The Age Pension and lifetime income stream help to protect against inflation, longevity and market risk, while the account-based pension provides flexible access to money. All three income streams combined can help to provide you with higher income over your retirement.

How much guaranteed lifetime income should I have?

While this depends on your individual circumstances, a good starting point is to consider how much income you need in retirement.

The Association of Superannuation Funds of Australia (ASFA) publishes ‘Retirement Standard’ figures four times a year, which can help you get an idea of the income you will need to match your lifestyle income needs. The table below compares these Retirement Standards to the full Age Pension amount.

Association of Superannuation Funds of Australia (ASFA) Retirement Standard figures

  Comfortable lifestyle budget p.a.  Modest lifestyle budget p.a.  Age Pension p.a.
Couples aged around 65  $65,445 $42,621 $38,709
Single person aged around 65 $46,494 $29,632 $25,678

Full Age Pension rate as at  1 July 2022, ASFA budgets as at March 2022 quarter.


This shows that the ASFA modest retirement lifestyle is slightly above the full Age Pension amount.

If you can meet your essential expenditure needs with the full Age Pension alone then a lifetime income stream might not be necessary for you. Similarly, if you have enough money to provide your desired income for life without ever needing the Age Pension, a lifetime income stream might not be necessary for you.

However, if you are like many retirees in Australia who can’t meet their essential expenditure needs with the full Age Pension alone, and your income from other sources is not enough to meet these expenses for life, then a lifetime income stream might be necessary to maintain your lifestyle over the course of your retirement. 

You should consider how much income on top of the full Age Pension amount you need to meet your essential expenses in life. Investing a proportion of your retirement savings into a lifetime income stream that will provide this amount of additional income can help you fill the gap between the full Age Pension and your essential expenditure needs.

You should consider your own personal circumstances and preferences before making any decision. Professional financial advice can help you determine how much income you need on top of the full Age Pension amount and what type of lifetime income stream is most appropriate for you.

The following useful spending planners can help you to determine whether you can live on the full Age Pension, and if not, help you determine how much lifetime income you might need on top of the full Age Pension:

Project how long your retirement income will last

It is not always easy to understand how long your retirement savings will last or how much Age Pension you will be eligible for. The Challenger Retire with Confidence tool can help you to:

  • see how long your superannuation savings will last;
  • determine how much Age Pension you may be eligible for; and
  • understand how a lifetime income stream could help you meet key retirement objectives.

 

 

How your product fits into the Strategy

Guaranteed Allocated Pension is a low-risk account-based pension which offers a guaranteed fixed rate investment option and a cash investment option.

If you have a Guaranteed Allocated Pension product you are protected from market and sequencing risk, as your investments are not impacted by market volatility. The returns are competitive for low-risk investments and have no fees, which helps you to maximise your retirement income. However, the Guaranteed Allocated Pension is not designed to help you to manage inflation or longevity risk. 

If you are invested in the cash investment option, you have flexible access to your savings – you can easily withdraw a lump sum (in part or in full) at any time.

If you are invested in the fixed rate investment option, your fixed rate investments are designed to be held until the end of the investment term, when you can access your savings. However, you can choose to break your fixed term (break costs apply) and access your savings before the end of the term if your circumstances change.

As part of an income layering strategy, the income you receive from your Guaranteed Allocated Pension is recommended for your desirable, non-essential needs. It might not be suitable as a source of income to meet your essential needs as it might not last your whole life, and the value of your income can deteriorate over time as a result of inflation. 

To ensure you have enough income to meet all of your essential expenditure requirements for your lifetime, you should consider investing a portion of your retirement savings in an inflation-linked, lifetime income stream. A lifetime income stream can help you cover longevity, inflation and market risks. Additionally, a lifetime income stream could help you boost your Age Pension today1, which might help you with maximising your retirement income. However, as a lifetime income stream is intended to be held for life, it does not have flexible access to money.

You can’t add more money into your existing income stream. If you need flexible access to additional funds to meet your desired, non-essential expenses in the future, you should consider investing any additional superannuation amounts in an account-based pension outside the Fund.

Because all the Fund’s products are closed, including the Guaranteed Allocated Pension product, you can’t commence a new income stream or invest new money in an account-based pension with the Fund.

Guaranteed Personal Superannuation is a superannuation fund which offers a guaranteed fixed rate investment option and a cash investment option.

If you have a Guaranteed Personal Superannuation product you are protected from market and sequencing risk, as your investments are not impacted by market volatility. However, the Guaranteed Personal Superannuation is not designed to help you to manage inflation or longevity risk and you cannot draw an income from this product.

If you are invested in the cash investment option, you have flexible access to your savings – you can easily withdraw a lump sum (in part or in full) at any time once you’ve met a condition of release.

If you are invested in the fixed rate investment option, your fixed rate investments are designed to be held until the end of the investment term, when you can access your savings. However, you can choose to break your fixed term (break costs apply) and access your savings before the end of the term if your circumstances change.

If you are in or approaching retirement, you can consider investing your retirement savings in a layered solution, as described in this Retirement Income Strategy, in line with your personal circumstances and implemented with products from outside the Fund.

If you are not in or approaching retirement, the key retirement objectives might not be a consideration for you yet. At the appropriate time, you can consider a layered solution, as described in this Retirement Income Strategy, in line with your personal circumstances and implemented with products from outside the Fund.

Because the Fund’s products are closed, you can’t commence a new income stream with the Fund.

Term Life is a ‘risk-only’ insurance offering within super that offers Death cover to members, which includes terminal illness and Total and Permanent Disability (TPD) cover (issued by MetLife Insurance Limited).

If you have a Term Life product, the product does not enable you to achieve any of the key retirement objectives. You do not receive income from this product, you can’t access money, and the product does not address any of the key retirement risks. The product is designed to address insurance needs for you during your working life, not retirement.

If you have other sources of retirement savings to invest, you can consider investing your retirement savings in a layered solution, as described in this Retirement Income Strategy, in line with your personal circumstances and implemented with products from outside of the Fund.

Because all the Fund’s products are closed, you can’t commence a new income stream with the Fund. 
 

Resources

We have a range of educational resources to assist you when you are in or approaching retirement.

Case study

Cafe owners Fiona and Frank have recently retired. To help fund their retirement, they decided to sell their cafe and contribute the net proceeds from the sale to top-up their superannuation. 

Fiona and Frank are looking for a comfortable retirement and have estimated they would need an income of about $60,000 p.a. to help fund it. They’re sure they can’t get by on the Age Pension alone (they are currently receiving $24,198 p.a.) and think they’ll need at least $43,000 p.a. to meet their basic living expenses.

See here for how Frank and Fiona achieve their 'comfortable' lifestyle in retirement by using a combination of income streams. 


Frank and Fiona
 

Financial advice

Getting quality financial advice can help you retire with confidence.

Find a financial adviser

If you’d like some assistance finding a financial adviser, simply fill out our form online and let us know some of the things you’d like to speak with an adviser about.

We’ll contact you with a shortlist of financial advisers for you to choose from2. A financial adviser can help you tailor a retirement income solution for your situation.


Financial adviser register

The Government also has information available on their Money Smart website, including:

  • a Financial Adviser Register – You can check financial adviser locations, qualifications, and previous employment;
  • tips for choosing an adviser;
  • an explanation of financial advice costs.

FAQs

The Retirement Income Strategy is designed to help members in and approaching retirement to maximise their retirement income, manage risks and to have flexible access to their money. 

Transitioning into retirement is a big change for most people, and we are here to help you to navigate this transition.

The Retirement Income Strategy is designed for members who are in or approaching retirement, which we have defined as 60 years or older.

If you have a Guaranteed Personal Superannuation, Guaranteed Allocated Pension or Term Life (under Super) product, please see the ‘How your product fits into the Strategy’ section above.

If you have a non-commutable Guaranteed Lifetime Pension Plan, Guaranteed Income Pension Plan or Term Allocated Pension product you are not covered by this strategy, given the non-commutable nature of your product. You may still benefit from the educational materials provided as part of the above Retirement Income Strategy.

Retirement income includes payments from your superannuation (both income and capital drawdowns), the Age Pension and other sources of income you receive during the period of retirement.

The period of retirement is intended to cover the period from the start of your retirement for however long you live. 

The average age which we expect members to live until is based on the Australian Life Tables (ALT) produced by the Australian Government Actuary (AGA). The mortality rates used are the ALT 2015-17 tables with 25-year improvement factors, allowing for the fact that people are living longer due to improvements in medicine, science and nutrition. 

It is important for you to consider that approximately half of all retirees will live past their life expectancy, meaning it may be a significantly longer time that you need income for.

Average life expectancy
From birth
From age 66
From age 66 with mortality improvements
Males
80 85
88
Females
85 87
90

You do not need to change your products or investments if you are happy with the way they currently are. The Fund’s Retirement Income Strategy is intended to provide information and guidance which can assist members to make an informed decision for their own personal circumstances.

No, income layering is not mandatory. The income layering strategy is one that may help retirees to balance and achieve the key retirement objectives – maximise retirement income, manage risks and gain flexible access to their money.

This will be different for most retirees.

The Association of Superannuation Funds of Australia (ASFA) updates the ‘Retirement Standard’ figures four times a year, which can help you get an idea of the income you will need to match your lifestyle income needs. 

 

Association of Superannuation Funds of Australia (ASFA) Retirement Standard figures


Comfortable lifestyle budget p.a.
Modest lifestyle budget p.a.
Couples aged around 65 $65,445 $42,621
Single person aged around 65
$46,494 $29,632

ASFA budgets for March 2022 quarter.

 

The following useful spending planners are based on the ASFA retirement standard figures and can help you to determine whether you can live on the full Age Pension, and if not, help you determine how much lifetime income you might need on top of the full Age Pension:

If you can meet your essential expenditure needs with the full Age Pension alone then a lifetime income stream might not be necessary for you. Similarly, if you have enough money to provide your desired income for life without ever needing the Age Pension, a lifetime income stream might not be necessary for you.

However, if you are like many retirees in Australia who can’t meet their essential expenditure needs with the Age Pension alone, and your income from other sources is not enough to meet these expenses for life, then a lifetime income stream might be helpful to maintain your lifestyle over the course of your retirement. 

You should consider how much income on top of the full Age Pension amount you need to meet your essential expenses in life. Investing a proportion of your retirement savings into a lifetime income stream that will provide this amount of additional income can help you fill the gap between the full Age Pension and your essential expenditure needs.

You should consider your own personal circumstances and preferences before making any decision. Professional financial advice can help you determine how much income you need on top of the full Age Pension and what lifetime income stream product is most appropriate for you.

We have put together some educational resources to assist you when you are in or approaching retirement. These materials are provided free of charge and can be accessed in the Resources section above.
1 Age Pension benefits described above will not apply to all individuals. Age Pension outcomes depend on an individual (or couple’s) personal circumstances and may change over time. While lifetime income streams may immediately benefit some Age Pension eligible retirees who are assessed under the assets test, in later years, if assessed under the income test, any ongoing Age Pension benefits may be reduced. Consult your financial adviser about potential impacts on your personal circumstances and whether a lifetime income is right for you.
2 The list of financial advisers we provide are not authorised representatives or agents of any company in the Challenger Group, and Challenger does not make any representations about, nor accept responsibility for the suitability of the advice you may receive. Challenger does not make any money from referring you to a financial adviser. We only make money if you decide to purchase one of our products, but there is no obligation on you to buy a Challenger product.

 

Disclaimer
The information in this webpage is issued by Challenger Retirement and Investment Services Limited (ABN 80 115 534 453) (AFSL 295642) (referred to as CRISL), the trustee of the Challenger Retirement Fund (ABN 87 883 998 803). The information in this webpage is intended to be general only and has been prepared without taking into account your objectives, financial situation or needs. Because of that, you should consider its appropriateness, having regard to your objectives, financial situation and needs and consider seeking professional financial advice before acting on any such information.  

Any examples shown in this webpage are for illustrative purposes only and are not a prediction or guarantee of any particular outcome. This webpage may include statements of opinion, forward looking statements, forecasts or predictions based on current expectations about future events and results. Actual results may be materially different from those shown. This is because outcomes reflect the assumptions made and may be affected by known or unknown risks and uncertainties that are not able to be presently identified.

Provision of any general advice to retail clients means that we are required to provide you with a financial services guide (FSG). You can find the latest version of our FSG here. Our FSG includes information to assist you in deciding whether to use any of the financial services offered by us, including who we are, the financial services we offer, the financial products to which those services relate, how we and others are paid in connection with those services, relevant relationships we have, your privacy and how we deal with complaints. 

Challenger Retirement and Investment Services Limited is not an authorised deposit-taking institution for the purpose of the Banking Act 1959 (Cth), and its obligations do not represent deposits or liabilities of an authorised deposit-taking institution in the Challenger Group (Challenger ADI) and no Challenger ADI provides a guarantee or otherwise provides assurance in respect of the obligations of Challenger Retirement Investment Services Limited. Accordingly, unless specified otherwise, the performance, the repayment of capital and any particular rate of return on your investments are not guaranteed by any Challenger ADI.