Dramatic spike in purchases of retirement product

Annuities have been available to retirees and pre-retirees for decades – with limited take-up – but it seems Australians are finally coming round.

Annuities and funds management business Challenger is forecasting double-digit growth this financial year on the back of heightened demand for retirement income products, the Australian Financial Review reports.

Challenger chief executive Nick Hamilton said that with the baby boomer generation entering retirement, demand for annuities had soared 53 per cent to $3.6 billion.

“There’s more people coming to retirement and there’s a need for certainty,” Mr Hamilton said. “We’ve seen very strong growth around inflation-linked lifetime products.”

Interest rates

The rise is partially attributed to those steadily rising interest rates.

For example, rising interest rates allowed Challenger to pay clients with three-year annuities a 5 per cent rate by October last year, up from just 1.5 per cent in 2021. 

“For retirees, higher interest rates provide additional income, so they’re not living off as much capital,” Mr Hamilton says.

The latest news reflects YourLifeChoices’ findings about retirees increasingly finding annuities an attractive income stream.

In the 2019 YourLifeChoices Ensuring Financial Security in Retirement survey, 89.5 per cent of the 3380 respondents said they would not consider an annuity. 

Fast forward to the 2022 YourLifeChoices Insights survey, which drew 6148 respondents. The ‘no’ brigade had dropped to 58.4 per cent. Another 30 per cent said they were unsure and 10.3 per cent said they would seriously consider an annuity or already had one.

What is an annuity?

According to MoneySmart, an annuity is a lifetime or fixed-term pension that gives you a guaranteed income.

You can use your super or savings to ‘buy’ an annuity from a super fund or specialist company. Customers can choose if they want the payments for a fixed term, according to life expectancy or for the rest of their life.

You can only use money from your super if you have reached preservation age, which depends on when you are born. You must also meet the super funds’ condition of release, which may mean you must be permanently retired or permanently disabled.

The advantage of an annuity is that the income is fixed (although it can be indexed to protect against inflation) so it’s more stable than an account-based pension, which often relies on investments such as stocks, property or bonds which wax and wane over time.

There are also tax advantages. Income from an annuity bought with super is tax free from age 60.

If you’re between 55 and 59, then any annuity payment may have taxable and non-taxable components.

There are also advantages when applying for the Age Pension.

Under Centrelink rules, all assessable assets are counted when calculating your eligibility for the Age Pension.

However, only 60 per cent of the purchase price of a lifetime annuity will count as an asset through to age 84 or for a minimum of five years. From that point onwards, 30 per cent of the purchase price counts as an asset. 

So purchasing an annuity will lower your asset level and, as a result, you may be eligible for Age Pension payments or for higher payments if you already receive a part Age Pension.

Do you have an annuity? Would you consider one? Why not share your opinion in the comments section below?

Also read: An annuity could increase your Age Pension

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Jan Fisher
Jan Fisherhttp://www.yourlifechoices.com.au/author/JanFisher
Accomplished journalist, feature writer and sub-editor with impressive knowledge of the retirement landscape, including retirement income, issues that affect Australians planning and living in retirement, and answering YLC members' Age Pension and Centrelink questions. She has also developed a passion for travel and lifestyle writing and is fast becoming a supermarket savings 'guru'.


  1. Hi Tony
    Yes. You can purchase an annuity from a 3rd party if your super fund does not have that option for you.

    Disclosure: I work for Challenger- the provider noted in the article. If you want advice on how to do this (which I’m not providing here- like the disclaimer above) talk to a financial adviser who can consider how it might work in your circumstances.

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