Retirement Income

The rise of annuities in Australia

5 min read


14 Jun, 2019

A steady and reliable source of income in retirement is one way to ensure you can confidently enjoy your later stages of life, without the worry of running out of money.
Retirement income can come in different forms, but one increasingly popular form of income stream with Australian retirees is annuities. Here we look at what annuities are, why they’re on the rise, and whether they could be a good fit for you in retirement.

What is an annuity?

An annuity is a secure financial investment that provides a guaranteed income stream for retirement. Simply put, you invest some of your savings with a Life company and in return, enjoy guaranteed regular payments for a fixed period or for the rest of your life, depending on the type of annuity you choose.

Annuities are protected from share market and interest rate movements and you can choose inflation linked income to help protect your lifestyle. They are designed to complement other retirement investments and sources of income, such as account-based pensions and the Age Pension.

Annuities becoming more popular with Australian retirees

In Australia, annuities have in fact been around for a long time but in recent times their popularity has increased rapidly. Challenger are the largest provider of annuities in Australia and have seen annuity investments more than double since 2015.

According to the Australian Prudential Regulation Authority (APRA), annuities accounted for 12% of total pension benefit payments in Australia, as of June 2018. APRA also reported that the number of annuity pension member accounts in 2018 surpassed 100,000 and annuity pension benefit payments reached a staggering $4.27bn.1

So just how much do people invest in annuities?

Whilst you can typically invest as little as $10,000 into an annuity, people often invest more. In fact, the average amount invested into a Challenger lifetime annuity in 2018 was over 35% higher than in 2015.

You can choose to invest a portion of your super or savings as annuities are designed to complement other retirement investments and sources of income, such as account-based pensions and the Age Pension.

Why are annuities on the rise?

With Australians living longer than ever before, more and more retirees are looking for a regular and dependable income to see them through retirement and help support a comfortable quality of life as they age. A longer life expectancy means that products, like annuities, that provide guaranteed income in retirement to supplement pensions, cover healthcare and long-term care costs are becoming an increasingly popular choice.

In a time of increasing economic uncertainty and market volatility, annuities offer a secure and stable income safety net. Unlike an account-based pension which is linked to market performance, with an annuity you’re paid a guaranteed income regardless of how the markets perform.

What’s more, annuity payments can be linked to yearly changes to inflation, helping you to continue to afford tomorrow what you can afford today.

Is an annuity right for me?

When it comes to whether annuities make sense for you, consider whether you’re the sort of person who would value the security of a guaranteed regular income for a certain period of your life, or for the rest of your life. If the answer is yes, then annuities may be something you should consider speaking with your adviser about.

Talk to a financial adviser about the benefits of an annuity and whether an annuity might be right for you.


1 Australian Prudential Regulation Authority’s Annual Superannuation Bulletin June 2018.