Zenith gives Challenger annuities the green light

Challenger's suite of annuities, which collectively represents around 80 per cent of the annuity market share in Australia, has been given a 'recommended' rating by the research house Zenith.

According to Zenith senior investment analyst Dugald Higgins, Challenger has "really beefed up their marketing effort" since the global financial crisis hit.

"Essentially they're trading on retirees' fear that they're going to run out of money in retirement. So the [current] environment works very well for them," he said.

Challenger is the "dominant player" in the market, and while Westpac and the Commonwealth Bank also have annuity products, "they're pretty small players at the end of the day", said Higgins.

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Retirement income products in general are becoming a much bigger story in the minds of planners and their clients as the first wave of baby boomers begins to retire, said Higgins.

While Challenger controls 80 per cent of the annuity market, its dominance doesn't necessarily mean investors are "missing out", said Higgins.

"There are other products [out there]. NSW Treasury has a product that is very similar to some of the Challenger annuities. And we would think that arguably it is marginally better from the point of view of the rate that it pays - but it is a different product," he said.

Zenith rated the following Challenger products as 'recommended': the Challenger Guaranteed Income Fund, the Challenger Care Annuity, the Challenger Guaranteed Pension Fund, the Challenger Guaranteed Income Plan, the Challenger Guaranteed Liquid Lifetime and the Challenger Guaranteed Annuity.