Investment manager Challenger has expanded its annuity product range and will offer a guaranteed floating-rate lifetime annuity that has payments linked to the Reserve Bank of Australia (RBA) cash rate.
Challenger distribution, product and marketing chief executive Angela Murphy said the new annuity was the first retirement income stream to be linked to the RBA cash rate and offered to retail investors.
Murphy said it offered estate and withdrawal benefits and could improve age pension eligibility for asset test-affected clients.
“This is a smart new defensive solution for providing income certainty, particularly given current global market volatility, and can be combined with other products, such as account-based pensions, to build comprehensive retirement solutions,” she said.
She added the annuity would generate higher annuity payments as the RBA cash rate increases, and while payments would move in line with any rises and falls in the cash rate, investors would not miss out on any increases when rates started to rise again.
The RBA Cash Linked option had been developed to support advisers and their retiree clients and follows the release of Challenger’s Retire With Confidence tool, which educates retirees and pre-retirees on their retirement income options, she said.
The new annuity will be offered as part of Challenger’s Guaranteed Annuity (Liquid Lifetime) product range, which also includes annuities that are fully or partially linked to the consumer price index or have no indexation.
Murphy highlighted the benefits of annuities had been evidenced during the COVID-19 pandemic, with the products continuing to generate a guaranteed income stream as income from other investments, including dividend payments, has fallen away or been suspended.
“A lifetime annuity is designed to complement other sources of retirement income like an account-based pension or the age pension, and can be used to fund everyday living costs, providing peace of mind that no matter what investment markets do, an income stream will be paid,” she said.
