Lifetime Income Streams

However, several innovations have been incorporated into lifetime income streams over the past few years to make them more attractive and provide greater flexibility to meet the individual needs of the retiree.

For example, you can have a guaranteed payment period which ensures that in the event you die within a certain time-period after commencement of the income stream, say 20 years, payment will continue to be made to your beneficiaries until the end of that period. Many current lifetime annuities can also provide a withdrawal period for several years after commencement of the annuity, for example equal to the investor’s life expectancy.

Another popular feature is to nominate a reversionary pensioner. This allows your pension to continue to be paid on your death for the lifetime of the second nominated pensioner, such as a spouse.

Please note: From 1 July 2019, new means test rules have been established for those eligible to receive a government aged pension to encourage the development and take-up of lifetime retirement income products (e.g. certain annuity products) that can help retirees better manage the risk of outliving their savings:

• the income test will assess only 60% of all pension income payments received from a lifetime pension;
• the assets test will assess only 60% of the nominal purchase price of the lifetime pension until the person reaches the life expectancy of a 65-year-old male (currently age 84) – or a minimum of five years – and then 30% of the purchase price for the rest of the person’s life.

Grandfathering applies to lifetime income streams purchased before 1 July 2019. This means that these income streams will continue to be assessed under the rules that existed prior to 1 July 2019.

Innovative retirement income streams (IRIS’s)

In 2017, a new category of retirement income products was introduced known as Innovative Retirement Income Streams (IRIS). These rules were introduced to make longevity products, such as lifetime income streams, more attractive to retirees by incorporating investment choice, built‑in protection and some flexibility in respect to accessing capital. Several super funds have now introduced different versions of these IRIS retirement income stream products and given the government’s push for super funds to play a bigger role in developing retirement income streams that better suit the needs of its members and retirees, greater innovation in this space is expected going forward.