Aviva today warned financial advisers that it expected the $1 billion complying Immediate Annuity market will slump by more than 50% post 20 September 2004, when the current 100% asset test exemption is reduced by half.
Aviva today warned financial advisers that it expected the $1 billion complying Immediate Annuity market will slump by more than 50% post 20 September 2004, when the current 100% asset test exemption is reduced by half.
Aviva jumped from ninth to third in the market during May and increased sales by 100% as advisers recommended complying annuities for their clients.
Rob Donaghy, Aviva’s group director products, marketing and strategy, says Aviva recognised the "last sales" potential in the market early and had been buying assets to meet the expected surge in demand.
"Advisers who have clients who would benefit from the 100% exemption need to think about it immediately. Right now, Aviva has managed to increase rates to help clients take advantage of the remaining period when they can achieve 100% exemption. (This product is offered through its wholly owned subsidiary, Norwich Union Life Australia Limited.)
"However, as we get closer to September 2004 we may be forced to lower rates because of the increased demand for appropriate assets to back the annuities. In that case many clients would actually find they are disadvantaged," said Rob.
As a guaranteed income stream, a complying Immediate Annuity is worth considering for retirees whose assets aren’t producing a lot of regular income.
As every $10,000 over the Assets Test lower limit can reduce Centrelink pensions by $30 each fortnight for some pensioners, the new rules are significant for retirees.
"These products aren’t right for all retirees but can be advantageous for those in the lower to middle net-worth category who could really benefit from a Centrelink pension but their assets place them outside the cut off," says Rob.
For example
Any single home-owner retiree with assets over the limit of $306,250 (2003/04) does not receive the Age Pension.However, if the same retiree with $400,000 in assets were to purchase a complying Immediate Annuity with $100,000, they would effectively decrease their total assessable assets by that $100,000. They would then be entitled to a part Age Pension and even a Pensioner Concession Card.
Under the indicated new rules, retirees with excessive assets will need to allocate twice as much of their assets to a complying Immediate Annuity to have the same result.
"By purchasing a complying Immediate Annuity now, retirees can ensure this investment remains 100% assets exempt for the life of the Annuity product – and this is quite a bonus for the asset rich yet income poor," said Rob.
For assistance in deciding if a complying Immediate Annuity is the correct investment for you please see a financial adviser.
Rob Donaghy is available for interview.
For further information please contact:
Simon Morgan
(03) 9829 8892
0407 966 632
Notes to editors:
- Aviva Australia is a group of two specialist financial services companies: Navigator and Norwich Union Life Australia Ltd. Portfolio Partners, the Australian funds management arm of Aviva plc, is a sister company. Through these companies we provide products and services in the areas of wealth creation, wealth management and wealth protection for more than 300,000 customers throughout Australia.
- Globally, Aviva Australia is part of Aviva plc, the world’s seventh largest insurance group, the largest insurer in the UK and one of the top five life companies in Europe. Aviva was formed in May 2000 through the global merger of CGU plc and Norwich Union plc.
- Aviva is a leading provider of life and pensions products to Europe and has substantial businesses elsewhere around the world. Its main activities are long-term savings, fund management and general insurance. It has premium income and investment sales from continuing operations of A$66.08 billion, and more than A$472 billion of assets under management (as at 1 January 2004). The group has more than 56,000 employees and 30 million customers worldwide.
- The information in this document reflects Norwich Union Life Australia Limited's (NULAL) understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances. The securities advice or information given in this document is of a general nature and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.
- Applications to invest in a financial product issued by NULAL must be made by completing the application form attached to the applicable Product Disclosure Statement ("PDS"). A PDS is available from Aviva or your financial adviser. Investors should consider the PDS before making an investment decision or deciding to continue to hold a product.