Brochures
Calculators
Webcasts and
animation
Challenger
Adviser
We offer a range of retirement tools, calculators
and resources online to help you ensure your clients
get the most out of retirement.
Challenger
Always ready
Challenger
Adviser support tools
Challenger
Adviser support tools
Brochures
Challenger
Guide to
annuities
Secure your future with a safe, reliable income stream
Guide to annuities
Introduction to Challenger annuities and
how they are used in retirement. Includes
a case study and FAQs.
For clients.
CG code: 760
This general information is issued by Challenger Life Company Limited (ABN 44 072 486 938) and is not personal financial, tax or social security advice. Before investing, you should read the relevant product disclosure statement (PDS) on www.challenger.com.au. The word ‘guaranteed’ means payments are guaranteed by Challenger Life from the assets of its relevant statutory fund.
Annuities
at a glance
Product features Contemporary annuities offer a choice of term, payment frequency, return of capital and inflation protection, so they can be structured to help provide the level of income you need to meet your essential lifestyle needs. Their features include:
• Regular payments in return for a lump-sum investment • Competitive earning rates fixed at the start of the investment • Fixed terms from one to 50 years, or for your lifetime • Regular payments made monthly, quarterly, half-yearly or yearly • Guaranteed regular payments regardless of share market movements and volatility • No management fees (note, you may agree to pay fees for services provided to you by your financial adviser) • Tax free payments for those aged 60 or over if bought with superannuation money • Most can be tailored to provide benefits for your spouse or another dependant • Liquidity in the form of a guaranteed withdrawal period of 15 years in the case of Challenger’s ‘Liquid Lifetime’
annuity and 10 years for Challenger’s Care Annuity.
Take this guide with you when you visit your financial adviser.
Annuities at a glance flyer
Information sheet on the features of
annuities, portfolio construction and
Challenger.
For clients.
CG code: 963
Challenger
About
Challenger Life
July 2013
About Challenger Life brochure
Brochure answering common questions
around Challenger’s statutory fund, the
safety of annuities and Challenger.
For advisers and clients.
CG code: 960
Regular income and capital security – guaranteed
Challenger
Term
annuities
Fixed term annuities product flyer
A summary of the features of Challenger
term annuities.
For clients.
CG code: 745
Regular and secure income for life
Challenger
Lifetime
annuities
Lifetime annuities product flyer
A summary of the features of Challenger
lifetime annuities.
For clients.
CG code: 746
Helping you manage aged care fees
Challenger
Care
Annuity
Care Annuity product flyer
A summary of the features of the
Challenger Care Annuity.
For clients.
CG code: 838
Joe and Tina are 65 years old and retiring. Joe was a store manager and Tina was a stay-at-home mum. They have $300,000 in superannuation, all in Joe’s name. They own their home and have $20,000 in home contents. They have no other financial assets or debts. Joe and Tina estimate they’ll need a minimum income of $33,000 per year to maintain a modest lifestyle in retirement (this is roughly in line with the relevant ASFA Retirement Standard1).
However, they would prefer a slightly more comfortable retirement, particularly for the first ten years while they’re most active.They think they would need $50,000 per year to achieve that. Joe and Tina will receive some secure income from the Age Pension. Under current rules2, this is $30,818 in the first year of retirement. They expect their Age Pension will be less than their minimum income requirement, so they would like to find an additional source of secure income to make up the difference of $2,182 and ensure they can pay their bills. Joe and Tina’s life expectancies are 18.5 and 21.6 years respectively3. This is an average only – they are in good health, so could expect to live well past age 90. Like many Australians, Joe and Tina fear that their savings will not last as long as they will. Joe and Tina are concerned about share market volatility and would like moderate exposure to growth assets (50% in growth assets, 50% in defensive assets). They visit their financial adviser to find a suitable solution.
Case study
Setting up a secure
retirement income
Clients Joe and Tina
Age65 and retiring
Assets $300,000 superannuation in Joe’s name
Goals To always have money to pay for basic costs of living, have enough income to live comfortably, make sure their savings last the rest of their lives and protect against share market risk.
1 The ASFA Retirement Standard benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years. Visit www.superannuation.asn.au/resources/ retirement-standard for more information. 2 Based on the scenario where Joe converts his entire superannution into an income stream and drawing the required legislative minimum. 3 Source: Based on 2005-2007 Life Expectancy Tables from Australian Government Actuary www.aga.gov.au
Setting up a secure retirement income
case study
A case study explaining an income
layering strategy.
For clients.
CG code: 828
Betty is 87 and widowed. She was living on her own for some time after her husband passed away, but has become frail with age. After researching her options with the help of her family, Betty was assessed by an Aged Care Assessment Team as requiring low level care and found a suitable aged care home to move into.
Betty paid an accommodation bond of $250,000 to enter the home. She sold her house to pay for the bond and has $400,000 left over. She now wants to know what to do with this money. If Betty leaves her money in cash, under the current aged care rules, she will pay total aged care fees of $18,600 per annum (consisting of basic daily care fees of $16,257 per annum1 and an income-tested fee of $2,343 per annum2). Betty’s Age Pension entitlements will be $15,396 per annum3. Betty has visited a financial adviser to find out if there’s a way to reduce her ongoing aged care fees and get more from the Age Pension, as well as get a secure income from her investments.
Case study
Managing aged
care fees
Client Betty Age87 Assets $400,000 in cash Goals To minimise ongoing aged care fees, maximise Age Pension entitlements and receive a secure income from her investments.
1 Under the Aged Care Act 1997, the basic daily fee is $44.54 per day as at 4 June 2013. 2 Calculated as: (Total assessable income – Total assessable income-free area) x 5/12. 3 This is the amount of Age Pension Betty would receive if she held $400,000 in a bank account.
Managing aged care fees case study
A case study comparing three alternative
strategies for someone entering aged
care.
For clients.
CG code: 827
Challenger Limited
•
ASX 100 listed
•
Established in 1985
•
$48.8 billion FUM
Challenger Life
•
Largest annuity provider
in Australia
•
APRA regulated
life company
Challenger
Retirement
Specialists
We aim to provide you with: • Secure products • Coaching and education
support • Technology solutions • Efficient services
WINNER WINNER
Annuity Provider of theYear Award 2010
Challenger Retirement Specialists
An infographic-style snapshot of
Challenger and retirement concepts.
For clients.
CG code: 966
Aged care
what you need to know
Whether considering options for yourself or deciding how best to help someone close to you, aged care is a complex area and requires careful thought. The uncertainty surrounding where to move, how much it will cost and where the money will come from can be overwhelming and stressful.This guide provides the basics. You will understand the steps you need to take, where to find answers and how your financial adviser can help you make an informed decision.
Aged care – what you need to know
An unbranded brochure explaining the
process of entering aged care.
For clients.
CG code: 873
Calculators
Aged care calculator
Includes an investment analyser and
aged care fee calculator to compare
strategies.
For advisers.
Age Pension calculator
Calculator to help you work out your
client’s Age Pension entitlements.
For advisers.
Retirement calculator
A tool to help illustrate the impact of
using an annuity as part of a client’s
retirement portfolio.
For advisers.
Webcasts and animation
Income layering webcasts
Educational webcasts on the income
layering strategy, including a case
study.
For advisers.
Aged care webcasts
Educational webcasts on aged care
advice decision points.
For advisers.
Moshe Milevsky webcasts
Interview with Moshe Milevsky, one
of the most sought-after speakers
on issues related to investing in
retirement.
For advisers and clients.
Animations
A series of animations for investors
explaining retirement income
concepts.
For clients.
Investor case studies
Real Challenger investors discussing
their lives in retirement and how they
have used annuities to replace their
salaries.
For clients.
Adviser case study
An adviser’s views on the value of
financial advice and the role annuities
play in portfolio construction.
For advisers.
Challenger
Adviser support tools
Other items
Technical guide:
Challenger
Lifetime and
Term Annuities
Current as at 20 March 2014
Adviser use only
Technical guide: Lifetime and
Term Annuities
Guide covering the technical benefits of
Challenger Lifetime and Term Annuities
including Centrelink and taxation
treatment.
For advisers.
CG code: 969
Challenger
Care Annuity
Adviser guide
July 2013
Adviser use only
Care Annuity technical guide
A guide to the Centrelink and taxation
of the Challenger Care Annuity.
For advisers.
CG code: 950
Challenger
Aged care guide
July 2013
Adviser use only
Aged care adviser guide
A comprehensive guide to aged care
rules and regulations including case
studies and strategies.
For advisers.
CG code: 953
Retirement budget planner for couples
How will you fund your essential living costs? The numbers in the table indicate how much it could cost to fund either a modest or a comfortable standard of living in the post-work years. Have you thought about how much income you need to support the lifestyle you want in retirement, and where this income will come from? The Age Pension could be one source, but will it be enough?
Expenses ASFA
Modest1
ASFA Comfortable1Your expenses Housing – ongoing only $59.40 $83.14 $
Energy $54.64 $56.62 $
Food $153.92 $191.07 $
Clothing $29.15 $58.30 $
Household goods and services $35.54 $86.37 $
Health $74.89 $135.87 $
Transport $96.29 $142.20 $
Leisure $105.83 $295.00 $
Communications $16.61 $33.19 $
Total per week $626.27 $1,081.76 $ Total annual expenses $32,656 $56,406 $ A
Annual Age Pension
Up to $32,416.802 $ B
Income shortfall (A–B) $ C This list covers your essentials only. Will you need additional income for things like holidays, meals out, and unforeseen costs?
To make up the income shortfall of $ _________________ (insert C) you would need to invest $ _____________________ in a Challenger lifetime annuity
15718/0913
1 According to the ASFA Retirement Standard June 2013 quarter, this is the annual budget needed by Australians to fund either a modest or comfortable standard of living in post-work years. Refer to the ASFA website www.superannuation.asn.au 2 This is the maximum payment rate of the Age Pension for a couple applying from 20 September 2013 – 19 March 2014. Your rate depends on your income, assets and other circumstances.
This information is current as at 20 September 2013 unless otherwise specified and is provided by Challenger Life Company Limited ABN 44 072 486 938, AFSL 234670 (Challenger) which issues Challenger annuities. It is intended to be general information only and not financial product advice and has been prepared without taking into account any person’s objectives, financial situation or needs. Investors should consider the current product disclosure statement for the applicable annuity available at www.challenger.com.au and the appropriateness of the annuity (including any risks) to their circumstances before making any investment decision.
Retirement budget planners
Budget planners to work out a client’s
living costs in retirement.
For clients.
Challenger
Tech
For Adviser use only April 2014Our updated Age Pension calculator can help you project your clients’ estimated Age Pension entitlements over the next 15 years, or see if a lifetime annuity may increase their Age Pension entitlements. Visit AdviserOnline for access.
Lifetime annuities and the Age Pension
Around 68% of eligible Australians receive a full or part Age Pension1, making it an important source of income in retirement. Strategies that help maximise Age Pension entitlements play a key role in retirement planning as they can increase a retiree’s cash flow or reduce the amount they need to draw from their own financial assets. In this article, we consider how lifetime annuities can help enhance your client’s Age Pension entitlements while also providing income certainty in retirement. The interaction between the Assets and Income Test It is essential to understand the Income and Assets Tests and their implications for your client’s Age Pension entitlements. As at 20 March 2014: • The maximum Age Pension was $842.80 per fortnight for singles and $1,270.60 per fortnight for couples. • The Income Test reduces the Age Pension by $0.50 per fortnight for each dollar earned above: Singles: $156 per fortnight Couples: $276 per fortnight combined • The Assets Test reduces the Age Pension by $1.50 per fortnight for each $1,000 of assets held above:
Homeowners Non-homeowners Singles $196,750 $339,250 Couples $279,000 $421,500
1 The same rates and thresholds apply for the Service Pension payable by the Department of Veterans’ Affairs (DVA).
Challenger Tech articles
Technical articles covering a number
of topics, including Centrelink/DVA
treatment of annuities and aged care
reforms.
For advisers.
Age pension rates (20 March 2013 – 19 September 2013) Fortnightly Annual Single $808.40 $21,018.40 Couple combined $1,218.80 $31,688.80 Illness separated combined $1,616.80 $42,036.80 Includes Pension and Clean Energy Supplement. Pension Assets Test (1 July 2013 – 19 September 2013)
For full pension Disqualifying /allowance asset limits Homeowners Single $196,750 $735,750 Couple combined $279,000 $1,092,000 Illness separated $279,000 $1,357,000 Non-homeowners Single $339,250 $878,250 Couple combined $421,500 $1,234,500 Illness separated $421,500 $1,499,500 Pension Income Test (1 July 2013 – 19 September 2013) For full pension Disqualifying income limits Fortnightly Annual Fortnightly Annual Single $156.00 $4,056.00 $1,772.80 $46,092.80 Couple combined $276.00 $7,176.00 $2,713.60 $70,553.60 Illness separated $276.00 $7,176.00 $3,509.60 $91,249.60 Deeming thresholds and rates
Single Rate Couple First $46,600 2.5% First $77,400 Over $46,600 4% Over $77,400 Age Pension qualifying age Year born Age 1 January 1949 to 30 June 1952 65 1 July 1952 to 31 December 1953 65.5 1 January 1954 to 10 June 1955 66 1 July 1955 to 31 December 1956 66.5 On or after 1 January 1957 67
Per day
Basic daily care fee Standard resident $44.54 Protected resident $40.61 Phased resident $44.54 Non-standard resident $50.57 Daily income-tested fee Maximum $70.74 Singles (daily rate) (Total fortnightly income – $918.1015) x 5/12/14 Couples (daily rate) (Total fortnightly income – $1,800.2016) x 5/12/14/2 Accommodation bond (hostels/extra services places) (From 20 March 2013) Minimum assets after paying bond $43,000 Annual retention amount $3,972 Interest charge on periodic payment 6.82%17 Accommodation charge (Nursing homes) Individual total assets Max daily charge Up to $43,000 Nil $43,000 to $112,243.20 (Assets – $43,000)/2,080 Above $112,243.20 $33.29
Level 15, 255 Pitt Street Sydney NSW 2000 telephone 02 9994 7000 facsimile 02 9994 7777 Level 9 241 Adelaide Street Brisbane QLD 4000 telephone 07 3136 5400 facsimile 07 3136 5407 Level 7, Suite 714 147 Pirie Street Adelaide SA 5000 telephone 08 7071 7042 facsimile 08 8227 0395 Level 19 31 Queen Street Melbourne VIC 3000 telephone 02 9994 7000 facsimile 02 9994 7777 Level 2 168 St Georges Terrace Perth WA 6000 telephone 08 9261 7412 facsimile 08 9321 5277
Investor Services
13 35 66
Adviser Services
1800 621 009
www.challenger.com.au
Sources: • Department of Health and Ageing www.health.gov.au • Australian Taxation Office www.ato.gov.au • Centrelink www.centrelink.gov.au This information is based on current law at the time of writing and is current as at 1 July 2013. The facts and figures may change at any time. Challenger Life Company Limited ABN 44 072 486 938 AFSL 234670 (Challenger) does not take any responsibility for any error or omission, or for any loss arising from its use. Challenger is not authorised or licensed to provide tax or social security advice. This Ready Reckoner has been prepared solely for licensed financial advisers. It is general information only and is not intended as advice. It must not be passed on to a retail client. Any information provided or conclusions made, whether express or implied, do not take into account the investment objectives, financial situation and particular needs of an investor. Because of that, each person should, before acting on any such information consider the appropriateness of the information having regard to their objectives, financial situation and needs. Because this is a complex area, each person is strongly recommended to obtain relevant professional financial, taxation and social security advice. Issuer: Challenger Life Company Limited ABN 44 072 486 938 AFSL 234670. 15566/CG083/0713
Superannuation
Social security
Aged care
Contacts
Life Expectancy (2005 – 2007 Life Tables13) (Pension purchased from 1/1/10) Age M F 40 40.71 44.70 41 39.77 43.73 42 38.83 42.77 43 37.89 41.81 44 36.96 40.85 45 36.03 39.90 46 35.10 38.95 47 34.18 38.00 48 33.26 37.05 49 32.34 36.11 50 31.43 35.17 51 30.53 34.24 52 29.63 33.31 53 28.73 32.38 54 27.84 31.45 55 26.95 30.53 56 26.08 29.61 57 25.20 28.70 58 24.34 27.79 59 23.48 26.89 60 22.63 26.00 61 21.79 25.11 62 20.96 24.23 63 20.14 23.35 64 19.34 22.48 65 18.54 21.62 66 17.76 20.76 67 16.99 19.92 68 16.24 19.08 69 15.49 18.24 70 14.76 17.42
Age M F 71 14.04 16.61 72 13.33 15.82 73 12.64 15.03 74 11.96 14.27 75 11.31 13.51 76 10.68 12.78 77 10.07 12.05 78 9.48 11.35 79 8.92 10.67 80 8.38 10.01 81 7.86 9.37 82 7.36 8.75 83 6.89 8.17 84 6.45 7.61 85 6.03 7.08 86 5.64 6.58 87 5.27 6.11 88 4.94 5.68 89 4.63 5.28 90 4.36 4.91 91 4.11 4.57 92 3.89 4.27 93 3.69 3.99 94 3.51 3.75 95 3.36 3.53 96 3.22 3.33 97 3.10 3.16 98 2.99 3.00 99 2.90 2.86 100 2.81 2.74 Account-based pension Minimum drawdown14 Age % of account balance Under 65 4% 65-74 5% 75-79 6% 80-84 7% 85-89 9% 90-94 11% 95+ 14%
13 These tables are for technical calculations only. They underestimate actual life expectancy as they are historic statistics and do not take into account mortality improvements. 14 A maximum limit of 10% of the account balance applies to
transition to retirement pensions.
15 For protected residents use $789.30. For phased residents use $918.10. 16 For protected residents use $1,542.60. For phased residents
use $1,800.20. 17 From 1 July 2013 to 30 September 2013.
Challenger
Ready
Reckoner
1 July 2013
Ready Reckoner
Quick reference guide on the latest
tax rates, Centrelink thresholds,
superannuation contributions and taxes,
life tables and aged care information.
For advisers.
CG code: 083
Frequently asked questions
For advisers
At Challenger we want to provide the best possible support, so we have come up with the answers to some common questions about annuities which your clients may ask you.
Q. What is an annuity? A. An annuity is a secure investment that provides your client with a series of regular payments, either for a chosen term or for their lifetime, in return for a lump-sum investment. It can be used with other retirement investments, like account-based pensions, to set your client up with a dependable income that can last throughout their retirement.
Q. What are the benefits of having an annuity? A. An annuity benefits include: • regular payments in return for a lump-sum investment • competitive earning rates fixed at the start of the
investment • fixed terms from one to 50 years, or for the client’s
lifetime • regular payments made monthly, quarterly, half-yearly
or yearly • guaranteed regular payments regardless of share
market movements • no management fees • generally tax-free payments for those aged 60 or over
if bought with superannuation money • can be tailored to provide benefits for your client’s
spouse or another dependant • can maximise Centrelink entitlements.
Q. How safe are annuities? A. Challenger Life is regulated under the Life Insurance Act 1995, which governs the provision of annuities in Australia. Under this Act, Challenger Life is subject to prudential regulation by APRA, which actively supervises all Australian life companies to help ensure they are able to meet their obligations to investors. If the money in the Statutory fund falls below the level required to make payments to investors, Challenger Life is required to top it up.
Q. How is the money I invest in an annuity used? A. When your client buys a Challenger annuity, their money is pooled with money from other investors along with additional money from the Challenger group. Challenger Life is required by law to keep this money separate from other funds in the Challenger Group, in what is known as a statutory fund. The statutory fund primarily invests in fixed income (including cash), with some investments in commercial property, infrastructure and a very small amount in listed shares. The statutory fund is invested with the aim of achieving stable returns to generate reliable cash flows that are sufficient to meet payments to all investors. Challenger Life is required to comply with APRA’s capital adequacy standards to help ensure that obligations can be met. Challenger Life holds more assets in the statutory fund than the APRA minimum.
Q. Can I withdraw the annuity before the end of the investment term? A. Yes. If your client wants to withdraw from their annuity before the end of the term, they may receive back an amount less than the amount they originally invested, even after taking into account any payments they’ve already received.
Q. What happens to my annuity if I die before the term is up? A. For a fixed term annuity, your client’s estate or beneficiaries generally have the option to either continue to receive payments until the end of the term or withdraw the annuity and have it paid as a lump sum. The withdrawal value may be less than the original amount invested, even after taking into account any payments already received. With Challenger’s Lifetime Annuity, a withdrawal value is only available for the first 15 years of the annuity term. For the Care Annuity, a withdrawal value is only available for the first 10 years of the annuity term.
