Challenger counts on post-election changes
Challenger is counting on the incumbent Government to swiftly change regulation around a particular type of annuity product and clear the way for its launch in Australia.
Following the announcement of a stellar full-year result, Challenger chief executive officer Brian Benari said the company had a number of new products in the pipeline, but that one - deferred lifetime annuity - currently cannot be issued in Australia because of regulatory impediments.
A deferred lifetime annuity - or future-starting annuity - is an annuity that is purchased for an up-front premium and where payments do not commence immediately, but rather when a client reaches a certain age (and continues for life).
The existing law requires that income streams must make payments at least annually.
However, as a deferred annuity does not meet this requirement, it does not qualify as an income stream; therefore, it is not entitled to the associated concessional tax treatment that applies to earnings on superannuation assets supporting income streams.
“The existing government announced that they intend to remove those impediments and the Coalition recently said it was supportive of this move,” Benari said.
In announcing its Federal Budget earlier this year, the Government confirmed it would be encouraging the take up of deferred lifetime annuities by providing the products with the same concessional tax treatment that applied to investment earnings on superannuation assets supporting retirement income streams from 1 July, 2014.
At a recent Association of Financial Advisers/Money Management breakfast function, Liberal MP Paul Fletcher said on behalf of the Shadow Minister for Financial Services Mathias Cormann, the Coalition would work with stakeholders to review the regulatory barriers “currently restricting the availability of relevant and appropriate income stream products for Australian retirees”.
“Let me add that we acknowledge the announcement in the May Budget of the Government’s plan to extend concessional tax treatment to deferred lifetime annuities, and we welcome that as far as it goes,” Fletcher said.
“However we want to go through a proper and methodical process of having a look at the barriers applicable to income stream products.”
This was the Coalition’s first endorsement of deferred life annuities specifically, according to Benari.
“Our expectations are if either side of politics ends up getting in, the regulatory impediments will be removed,” Benari said.
Challenger is also looking to launch an extension to its Care Annuity product at the back of the Productivity Commissions inquiry into aged care, Benari added.
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