Retirement Income Covenant drives innovation with Challenger expanding annuity options

by | Oct 6, 2021 | IN THE MEDIA

Challenger Life, Australia’s largest provider of annuities, today announced a new market-linked lifetime annuity that helps retirees to overcome longevity risk (outliving their retirement nest egg) while maintaining exposure to investment markets.

Challenger has introduced innovative market-linked payment options to its award-winning Liquid Lifetime annuity, creating more choice in retirement incomes ahead of the introduction of the Australian government’s Retirement Income Covenant next year.

The market-linked option is available to financial advisers and their clients, and adds to Challenger’s institutional offering, providing superannuation funds with direct access to the market-linked capability and the flexibility to integrate as a bespoke solution within their retirement income strategy.

Challenger Life Chief Executive, Angela Murphy said the new market-linked lifetime annuity is part of a broader strategy by Challenger to lead industry innovation, expand its range of innovative retirement income solutions, increase customer reach and provide retirees with better financial outcomes. It complements Challenger’s range of guaranteed income annuity options to help solve a key retirement problem for advisers and their clients. It also provides a flexible and powerful capability that can help super funds address longevity risk, she said.

“An unprecedented number of Australians retire every day. We want them to get the retirement they deserve, one in which they spend well and live well. While many retirees enjoy the safety and security of a guaranteed income stream and no market risk, others may prefer to have exposure to investment markets’ ups and downs.

People are living longer, and many retirees are more financially aware than in the past. They want to stay invested in markets to have the potential to grow their income over time while accepting some downside risk.

“Our market-linked lifetime annuity will be offered to retirees as the government moves to legislate the Retirement Income Covenant. The Covenant will, over time, create a deeper market in retirement income solutions, that will give retirees more choice and flexibility in how they manage their retirement savings.”

Ms Murphy said the new annuity option was developed with financial advisers to help deliver suitable outcomes for their clients.

“Challenger consulted with a wide range of advisers in designing the market-linked lifetime annuity, with more than 80 per cent of advisers saying they would seriously consider the option to complement their clients’ other sources of income,” she said.

“Lifetime annuities are not an all or nothing proposition. They can be part of a retirement portfolio and complement other sources of income in retirement. Annuities make your retirement income last a lifetime and enable you to spend confidently. They provide certainty and control over estate planning outcomes and most importantly help to overcome the worry that you might become wholly dependent on the Age Pension.

“Combining the benefit of a regular income and exposure to investment markets, with the flexibility to review annually, is a compelling option that will drive strong interest from advisers and their clients. The combination will help overcome the anxiety many retirees have about outliving their retirement savings.

“In launching the market-linked indexation payment options, we have provided financial advisers with an opportunity to introduce the lifetime annuity concept to clients earlier while the client may have a higher risk-return tolerance and then, over time, adjust the risk profile inside the annuity to match the client’s reducing risk tolerance,” Ms Murphy added.

At 30 June 2021, Challenger Life had $22 billion in assets under management. The company has been at the forefront of the evolution of the annuity market for nearly 25 years and provides thousands of Australians with a regular income.

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