Guaranteed or Immediate Annuities
What is a Guaranteed or Immediate Annuity?

Guaranteed Annuities, also known as Immediate Annuities are a guaranteed regular income provided in exchange for an initial lump sum investment with an annuity provider.  These are typically for life, but you can also purchase annuities for a specific term.  The income you elect to receive can be paid to you, monthly, quarterly, half-yearly, or yearly, whichever suits your needs best.

Although, Guaranteed Annuities are commonly purchased with the proceeds from superannuation on retirement, they can also be bought with personal savings. You are not limited to just using money from your super fund.

There are 2 types of immediate annuities:

  • Term Certain Annuity
    Where you elect to receive income payments for a set period of time (generally from 1 to 25 years)
  • Lifetime Annuity
    Which guarantees to pay you an income for the rest of your life, regardless of how long you live.
Annuity Options

There are a number of different options you can choose when setting up your annuity. The options you choose will affect the level of income you receive from your annuity.

Annuities are based on a number of factors including your age, the size of your annuity fund and the options you select. It is crucial that you select the right type of annuity for you, because you cannot change your mind afterwards. You should consider both your immediate and long term needs carefully when making your decisions.

Probably the most important factor in selecting an annuity, are the rates offered by annuity providers. For example, currently level annuities produce much higher incomes than inflation proofed annuities. Many clients feel it unlikely you will live long enough to benefit from inflation proofing your plan and prefer to opt for standard level annuities.

When choosing your annuity, you are actually making two decisions:

Annuity Options

Fixed term Annuities – Whether you want your income to pay you for the whole of your lifetime or for a fixed term, typically ranging from 1 to 25 years?

Joint Life Annuities
– Whether you want your income to continue to your spouse or partner in the event of your death?

How do you want your annuity to change in future?

Annuity Payment Frequency – How often you want the annuity to be paid to you, monthly, quarterly, half yearly or annually?

Level or Increasing Annuities – You can elect for your payments to be level, increase at a fixed rate or inflation proofed to maintain the purchasing power of your income in years to come.  However, it is worth noting that these options come at a cost, an annuity that escalates in payment costs more to provide the same income as a level annuity.

Guaranteed/Immediate Annuities - What are the benefits?

Annuity returns are not linked to investment performance -
Guaranteed Annuities are a secure guaranteed income, regardless of investment performance. Once the rate of return has been set, you are guaranteed to continue to receive that income for life or the length of time chosen.

Annuity payments can continue regardless of how long you live for -
Lifetime annuities will pay you for life regardless of how long you live for, whether its 10 or 100 years, the annuity provider guarantees to continue payments to you.

Beneficial Taxation -
Some immediate annuity investments attract favourable social security and taxation treatments. The addition of annuities in your portfolio can greatly enhance your income and reduce your overall tax.  Speak to our advisers about a strategy to enhance your existing portfolio.