As reported in November 2014, the Australian government were considering copying the UK annuity system as the UK were planning to ditch it.
Financial services group Challenger is seeing sales in annuities soar as baby boomers seek guaranteed income in retirement.
Among the half year results announced today by Challenger was a record in retail annuity sales.
Total annuity product sales were $2.1 billion, up 22%, made up of record retail sales of $1.6 billion, up 8%, and institutional sales of $549 million.
CEO Brian Benari says Challenger experienced record first-half lifetime annuity sales during a time of industry debate about the need for innovative new longevity products for Australia’s retirees.
“While we support new thinking in this area, we caution that industry innovation shouldn’t come at the expense of retiree safety,” he says.
“While other wealth managers might express frustration at the cost of servicing the capital required to back lifetime promises, we think Australian retirees value the capital strength of a prudentially regulated financial institution.”
Australia’s 4 million baby boomers are only four years into a 20 year retirement phase.
“As the wealthiest generation in history, the boomers have a lot to lose, so place a very high value on capital preservation, as reflected in the size of our average annuity sale, which has grown from $80,000 to $200,000 over the last decade,” Benari says.
Challenger also announced that its total assets under management increased 17% to $57.2 billion at the end of December.
Challenger also announced earnings before interest and tax (EBIT) of $206 million, up 7%, and normalised net profit of $155 million. Statutory profit was $130 million.
The board declared a 70% franked interim dividend of 14.5 cents per share, up 16%.