What is an annuity

What is an annuity?

Annuities provide a secure guaranteed income, for your lifetime or for a fixed term of your choice. They can be used as the foundation of your retirement plan.

How do annuities work?

You invest some of your savings with Challenger and we pay you guaranteed regular payments for either a fixed period or for the rest of your life depending on the type of annuity you choose.

If you choose a Challenger lifetime annuity, we will continue to provide your payments for as long as you live.

Complements your retirement income

Challenger annuities complement other retirement investments and sources of income, such as your super and the Age Pension. They provide a secure income, either for your lifetime or for a fixed term you choose, regardless of how share markets perform.

Helping you to spend confidently in retirement

Challenger annuities give you peace of mind by providing you with guaranteed income. Annuities can be used to help cover your living costs and maintain your standard of living while in retirement.

With the security of an annuity helping you to pay for your essential expenses, you have more flexibility with how you manage your other investments for other discretionary spending, like on holidays and entertainment.

Why choose an annuity?

Retirement is a life-changing event. 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 and investments 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 will increase the 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. 

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

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Features of annuities

Make your retirement income last

Challenger annuities give you guaranteed income, regardless of how share markets perform.

Inflation linked income to help protect your lifestyle

A Challenger annuity gives you guaranteed income that can keep pace with inflation.

Flexibility to withdraw if your circumstances change

While Challenger annuities are designed to be held for the full investment term, there may be flexibility to access a lump sum if your circumstances change.

A lump sum benefit payable if you die early

Challenger lifetime annuities can have a long death benefit period where a lump sum is payable to your estate or nominated beneficiaries.

You may be eligible for an immediate increase in your Age Pension

With a lifetime annuity (Flexible Income option) only a proportion of your investment is counted under the assets test.

The Challenger guarantee

Challenger annuities are guaranteed by Challenger Life, a Life Company regulated by the Australian Prudential Regulation Authority (APRA).

Benefits of annuities

Secure income Protection against key retirement risks Helping you to spend confidently in retirement
They provide a secure income, either for your lifetime or for a fixed term of your choice.
They can act as a safety net, helping to ensure your essential income is protected from key risks in retirement.
They provide cash flow certainty that can help you maintain your standard of living, providing you peace of mind.

Is an annuity right for me?

When determining whether an annuity is right for you, it may help to focus on what your retirement goals are in more concrete terms. For example, working out how much your basic expenses are, how much you will need for a more comfortable lifestyle, if the Age Pension will be enough or whether you need an additional source of income to meet these goals.

If you value the security of a guaranteed, regular income for a fixed term or for the rest of your life, then an annuity could be a suitable investment option for you. In all cases, we recommend you speak to a financial adviser.

Annuities for retirement

We understand that your retirement goals and lifestyle needs are unique. That's why we offer a choice of annuities  to suit you. You can use part of your super or your personal savings to invest with a minimum investment amount of $10,000. 

Anyone aged 18 years and older can invest in an annuity, although if you are using your super to invest, you must be aged 601 or over and have unrestricted access to your super.

Lifetime annuities
Fixed term annuities
Challenger Guaranteed Annuity (Liquid Lifetime)

Gives you an additional layer of protection in retirement by providing guaranteed income payments for life, regardless of how long you live or how share markets perform. Here is what you will receive:

  • monthly payments for life (and your spouse’s life if you choose)
  • payments that start immediately or on a future date you choose (if using super savings to invest)
  • payments that keep pace with inflation (CPI-indexed payments)2
  • flexibility to withdraw and be paid a lump sum if circumstances change within the withdrawal period3
  • known estate value via guaranteed death benefit3
Challenger Guaranteed Annuity (Fixed Term)

Provides a guaranteed regular income for a fixed term you choose regardless of how share markets perform with flexible capital return options at maturity. Here is what you will receive:

  • the choice of a fixed term between one year and 50 years
  • the choice of monthly, quarterly, half-yearly or yearly payments
  • your investment repaid at the end of the fixed term unless you choose to have some or all of it repaid throughout the fixed term as part of your regular payments
1. Generally, to have unrestricted access to your super between the ages of 60 and 65 you must have ceased work. There are some limited circumstances where you may be eligible to invest with super money if you are under age 60, for example if your super fund has assessed you as totally and permanently disabled.
2. You can choose to only partially index payments annually with movements in the CPI (called ‘partial CPI’) or not to index payments annually with movements in the CPI (called ‘no indexation’) in return for higher starting payments.
3. You can ask us to remove these features in return for higher starting payments. But the choice is totally yours.

Next page > The retirement income quiz