Appetite grows for deferred annuities access


By Julie May

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More than 80 per cent of retirement planners were open to using deferred lifetime annuities (DLA) even though they were not yet available in Australia, according to Investment Trends research.

While DLAs were unavailable locally, the Financial System Inquiry had recommended the government look at removing tax impediments to products like DLAs, Investment Trends said yesterday.

“The “December 2014 Retirement Planner Report”, [which was based on an in-depth survey of 617 financial planners], reveals that 83 per cent of planners are open to using DLAs or similar products,” Investment Trends senior analyst Recep Peker said, adding advisers identified access and flexibility as the most sought after features.

“There’s strong planner appetite for DLAs in Australia. However, to ensure the success of DLAs, product providers need to ensure that planners’ minimum product feature requirements are met.”

Of the planners who would use DLAs if they were made available, 54 per cent said liquidity access was a necessary feature, followed by 40 per cent who nominated the availability of DLAs in superannuation.

Among planners who already used annuities, the percentage open to DLAs rose to 96 per cent, demonstrating positive experience with annuity products.

In regard to the annuity products that were currently available in the Australian market, 38 per cent of planners recommended annuities in 2014, up from 32 per cent in 2013 and 27 per cent in 2012.

Further, the intention to use the annuity products currently available was also up from 45 per cent in the previous study, with 59 per cent of planners intending to recommend annuity products in the coming year, Peker said.

Last month, Challenger chief executive Brian Benari told financialobserver although readily available overseas, DLAs could not be purchased by Australian retirees as they were not recognised under Australia’s taxation and superannuation systems.

“This was unintended, not deliberate, and would result in them being unfairly taxed if they were launched here,” Benari said at the time.

“We need to urgently level the taxation playing field to allow the introduction of DLAs, which will come at no cost to revenue, and have bipartisan political and wide industry support.

“With the latest [Intergenerational Report] stressing the looming fiscal cost of our ageing population, the time to act on DLAs is now.”

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