Frequently Asked Questions | Retirement Planning (2024)

We invest the money you give us. If we achieve investment returns that are above the amount required to cover the promises made to our annuity customers, we keep the excess amount. This is how we make a profit. If we do not achieve investment returns that are sufficient to cover all promises made to our annuity customers, we cover the shortfall from our own money.

We understand that this is a question that some people may have concerning their choice of where to invest their hard earned money in retirement.

When most people ask this question, they are generally referring to Challenger Limited, the ASX-listed company. It’s important to understand that Challenger annuities are provided by Challenger Life rather than by Challenger Limited.

The assets of Challenger Life that support the annuity payments are held in a separate statutory fund. These assets are unaffected by the share price of Challenger Limited.

Challenger Life (and any investment it makes in relation to the statutory fund) is regulated under the Life Insurance Act and the prudential standards made under it. Compliance with these requirements is supervised by the Australian Prudential Regulation Authority (APRA) to ensure we are able to meet our obligations to investors now, and in the future.

We are also required to hold enough capital within each statutory fund to withstand significant shock events. So even if an unfortunate financial event occurs like a significant share market or property crash, your annuity payments out of that statutory fund will still be made.

We have a number of measures in place and actions we will take if our capital falls below the minimum amount required to ensure the security of annuity payments. APRA will also take action if our capital falls below the minimum amount required in order to safeguard the interests of our annuity customers.

When you invest in a Challenger annuity your capital investment goes into a fund along with the capital received from other annuity customers. This is called a statutory fund. Challenger makes investments from this fund subject to restrictions outlined by the Life Insurance Act. Money is invested into cash, shares, government and corporate bonds, convertible notes, debt instruments, property investments, infrastructure investments and other assets.

Read our latestannual review for more information.

A guaranteed death benefit is payable for the duration of your life expectancy, up to a maximum of 27 years. The death benefit equals 100% of the amount invested for the first half of the death benefit period (rounded down to a whole year) and we don’t reduce the death benefit for any income that has already been paid to you.

See the relevantProduct Disclosure Statementfor more information.

There’s flexibility to cancel the investment at any time during your life expectancy, up to a maximum of 27 years (rounded down to a whole year), so you have access to a lump sum if you ever need it. The maximum withdrawal value starts at 100% of the amount invested and steadily reduces to nil.

The actual withdrawal value we pay you is impacted by movements in interest rates and an allowance for the cost to us of breaking the investment. That is why it is only possible to determine the withdrawal value at the time of withdrawal.

See the Product Disclosure Statementfor more information.

No. Challenger annuities are designed to help provide a foundation of guaranteed regular income for your retirement portfolio. Investing some of your retirement savings or super in a Challenger lifetime annuity will give you a monthly income for life.

You can invest as little as $10,000.

A Challenger lifetime annuity may immediately increase your Age Pension because only a portion of your investment is counted under the assets test. Any benefit will depend on whether you are assessed under the assets or income test.

For market-linked lifetime annuities, monthly payments will move up or down annually adjusting to the changes in your chosen market-linked indexation payment option. In periods of strong market performance, any Age Pension benefits may reduce to reflect the higher income received.

Speak with your financial adviser before making any financial decisions.

For annuities purchased with superannuation money, income payments and lump sum withdrawals are generally tax-free if you are age 60 or over.

For annuities purchased with your retirement savings (outside super), income payments and lump sum withdrawals may have some taxable income. Challenger provides an annual PAYG statement which has all the details you need to complete your tax return.

For tax treatment of death benefits see the FAQ ‘Are annuities taxable to beneficiaries?’.

For annuities purchased with superannuation money, if a death benefit is paid to a dependant (as defined in law), for example a spouse or child under 18, it will be paid tax-free. However, if paid to a non-dependant, for example adult children, they may have some tax payable.

Find out more about tax on super death benefits.

For annuities purchased with money from your savings outside superannuation , death benefits may have some tax payable. Challenger provides a PAYG statement which has all the details you need to do your tax return as a beneficiary.

The Age Pension has an income free area for singles ($5,512 p.a.) and couples ($9,672 p.a. combined). Note this is for Centrelink assessable income which is often not the same as income earned.

For example, some assets are assessed using deeming, like cash, term deposits, shares, managed funds and account-based pensions, which is a calculated formula and not actual income earned.

Find out more about the Age Pension income test.

The Age Pension age is 67. It is based on your date of birth.

Find out more about the Age Pension age.

There are various types of assets which are assessed for Age Pension, many of which are assessed at market value or account balance, such as cash, term deposits, shares, super and investment properties.

Some assets are exempt from the Age Pension assets test, for example your principal home, aged care accommodation lump sums and prepaid funeral expenses.

And some are assessed differently again, for example lifetime annuities. A Challenger lifetime annuity (Flexible Income option) may immediately increase your Age Pension because only a portion of your investment is counted under the assets test.

Find out more about the Age Pension assets test.

The Age Pension has an income cut-out threshold for singles ($63,559.60 p.a.) and couples ($97,177.60 p.a. combined). Note this is Centrelink assessable income which is not necessarily income earned.

If you have assessable income at or above your relevant threshold you will not receive the Age Pension.

Find out more about the Age Pension income test.

Our Target Market Determination (TMD) outlines our intended customers for our products for whom the product is designed and appropriate (also known as the target market for the product). If you do not meet the target market outlined in the Target Market Determination, it is likely that the product would not be appropriate for you.

Your financial adviser will consider with you whether you are within the target market for the product as outlined in the Target Market Determination.

If you don’t have a financial adviser, you should consider whether you are within the target market described in the Target Market Determination along with the relevant Product Disclosure Statement (PDS), your objectives, financial situation and needs when determining whether a product is appropriate for you.

If you have questions regarding any of our products’ Target Market Determination, please discuss this with your financial adviser, or call our Investor Services team on 13 35 66 (Australia only) between 8.00am and 6.00pm (Sydney time) Monday to Friday.

Our Target Market Determination outlines our intended customers for our products for whom the product is designed and appropriate for. It is important that the target market described within the Target Market Determination for the product is considered, along with the Product Disclosure Statement, your objectives, financial situation and needs to determine whether a product is appropriate for you. A financial adviser can help you with this.

You can obtain a copy of the relevant product’s Target Market Determination and Product Disclosure Statement on our website.

If you have questions regarding our products, please discuss this with your financial adviser, or call our Investor Services team on 13 35 66 (Australia only) between 8.00am and 6.00pm (Sydney time) Monday to Friday.

This will be different for each individual or couple, however the Association of Superannuation Funds of Australia (ASFA) does provide a guide on how much super both single and couple retirees would need to achieve a comfortable lifestyle in retirement, assuming they draw down all of their capital and receive a part Age Pension. This is currently $545,000 for singles, and $640,000 for couples.

Find out more about the ASFA retirement standards.

This is personal tax advice and you should consider seeking help from an accountant or tax specialist to assist with this.

The tax-free threshold is $18,200, however you may be eligible for tax offsets like the Senior Australian Pensioners Tax Offset (SAPTO) and the Low Income Tax Offset (LITO) to help you reduce your tax payable (if any), possibly to nil.

Super income streams generally become tax-free when you turn 60, which can also help manage your taxable income.

Find out more about tax for seniors and retirees.