Challenger may be driving a comeback in lifetime annuity products following 12 months of increasingly strong sales, according to Plan For Life Actuaries and Researchers.
Lifetime annuity sales for the 12 months to September 2012 were $75 million, with sales steadily increasing each quarter.
The boom in annuity sales post the financial crisis consisted mainly of fixed term annuities, Plan for Life said. However, current trends indicated that lifetime annuity sales could surpass the $100 million mark in 2013 for the first time in nine years.
Sales had dwindled since the removal of the assets test exemption in 2004, it said.
The huge uptick in sales had accompanied the launch of Challenger's lifetime annuity product and had seen the company snare 95 per cent of market share from 0 per cent in 2010.
Responding to the market's lack of trained advisers following the closure of annuity products by major life companies, Challenger had created a specialist distribution channel, according to Plan for Life.
"By applying revised benefits to the policy and highlighting the problem of longevity through trained advisers, Challenger has tackled several key questions in the minds of many would-be annuitants," Plan for Life said.
A two-year marketing campaign had raised public awareness and increased advisers' knowledge of the need to have long-term guaranteed income in a retirement portfolio, it said.
"Having clients who also understand the risks of living too long helps to counterbalance the concerns they may have of losing control of capital, through locked-in products such as lifetime annuities," it said.
Minimum guarantee payments, which could lessen clients' 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 as long as 15 years, according to Plan for Life.
