Challenger drives lifetime annuity comeback

Challenger may be driving a comeback in lifetime annuities, according to Plan for Life Actuaries and Researchers.

Lifetime annuity sales for the 12 months to September 2012 reached $75 million and were slated to reach over $100 million in 2013 if current upward trends continued unabated, it said.

The huge uptick in sales accompanied the launch of Challenger's lifetime annuity product in 2010 and has seen the company snare 95 per cent of market share, compared to CommInsure's 5 per cent.

Plan for Life said increasing public and adviser awareness had played a role in the increase in sales, citing Challenger's two-year marketing campaign and specialist distribution channel as an integral part.

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Highlighting the problem of longevity through trained advisers allowed Challenger to tackle a number of key questions potential annuitants would have, according to Plan for Life.

Minimum guarantee payments, which could negate client concerns regarding loss of capital following an annuitant's death, had previously been too restrictive, the actuary said.Challenger's method of paying out during the guarantee period - granted one annuitant was alive and then paying a commutation value upon the annuitant's death - provided a substantial return for a period up to 15 years, according to Plan for Life. 

In February last year, The Actuaries Institute suggested that the "fading market" for lifetime annuities might be "due to lack of consumer awareness of the risks of not annuitising, as well as supply-side constraints".

It said there was a raft of regulatory and taxation regulations that could be amended to facilitate the growth of a "deeper, more developed annuities market".

Originally published on Money Management.