Challenger confident on core offer
Challenger is preparing for what it believes will be a period of growth in the annuities market as it sees a "renaissance in demand".
Speaking at its AGM, Challenger managing director and CEO Dominic Stevens described the post-retirement market as "the fastest growing sector of the savings market" and said the company is seeing a "renaissance in demand" for its annuity products.
Stevens said starting from a low base, sales of annuities have steadily risen over the last five years at more than 30 per cent. As the market leaders in that space, Challenger hopes to participate competitively in the coming years.
Referring to the DEXX&R Market Projections Report 2009-2019 (November 2009) and the Rainmaker Superannuation Projections Report 2008-2019 (December 2008), Stevens said the post-retirement portion of superannuation assets is forecast to grow at a compound annual rate of 15.9 per cent.
"This is significantly faster than the accumulation portion, which means the retirement pool is becoming much more important over time."
He said this would be supported by key trends, which included an ageing population as baby boomers enter retirement and increased risk aversion following the global financial crisis.
Referring to the latter, Stevens said: "This has also led to greater scrutiny of fees and commissions that tend to sit with more complex or risky products."
He said that annuities address various concerns of the Cooper Review into the superannuation system. This is because the product is not complex, carries no product or investment fees and offers strong returns. He added that annuities also address the drive for higher retirement incomes as "competitively priced lifetime annuities can provide higher and much more sustainable average retirement incomes".
In response to these trends, Challenger is upping its focus on the distribution, marketing and advertising of its annuity products. It recently launched its new annuity product on the BT wrap platform, the Guaranteed Income Fund, and Stevens said Challenger is gearing up its business development managers to reach four times as many planners and dealer groups.
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