An annuity is a simple, secure financial product that can provide an income over a period of time (either a fixed period of time or a lifetime) in return for a lump-sum investment. The rate of return is fixed at the outset, and is not affected by share market fluctuations or interest rate changes. Depending on the type of annuity, you can choose to have your original invested amount returned at the end of the agreed period of time (say 10 years) or paid as part of the regular income payments. In Australia, there are two main provides of Annuities - Challenger Annuities and Comminsure.
The benefits of annuities include:
- Deliver regular, income payments
- Includes options for indexation to help protect against inflation
- Lifetime Annuities can offer peace of mind as regular payments will be made over your lifetime
- Tax benefits when using Superannuation funds to commence an annuity
- Centrelink Aged Pension benefits
Unlike lifetime annuities, fixed annuities are designed to be held to term (i.e. 5 years). If you would like to cancel your fixed term annuity, similar to a term deposit, you may have to pay a break cost to receive the originally invested amount less any payments you would have received since you held the annuity for its agreed term.
Looking at starting an Annuity?
All investments carry some risk. Your suitable risk level is dependent on factors such as your financial goals, yours and your partners age and your investment timeframes. We recommend you speak with usto determine whether an annuity is appropriate for you.
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