Holders of annuities, or those considering them, might be feeling uneasy after the 2006 Budget announcements. But is it time to panic? Navigator technical marketing manager, Martin Breckon doesn’t think so.
Holders of annuities, or those considering them, might be feeling uneasy after the 2006 Budget announcements. But is it time to panic? Navigator technical marketing manager, Martin Breckon doesn’t think so.
“Don’t automatically exit out of existing plans, if an exit option is available or if one is provided by the government,” he said.
The proposed Budget announced in May included superannuation measures that could lessen the need for annuities:
- Abolition of Reasonable Benefits Limits would challenge the value of certain superannuation products such as term-allocated pensions.
- The prospect of tax-free withdrawals, either as a lump sum or a pension, casts a further shadow on structures traditionally designed to maximise tax-effectiveness in the twilight years.
- Centrelink asset test tapers would be more generous, putting less pressure on investments to be high-return, with high-end management.
- And, from 20 September 2007, the Government proposes removing the 50% asset-test exempt rule for annuities and pensions purchased after this date.
Martin said: “People wishing to supplement their retirement savings with Centrelink benefits have until this date to take advantage of this rule. We expect a surge of sign-ups for term-allocated pensions ahead of this change. Additionally, with the reduction in the asset test taper, the Centrelink benefits can only be increased.
Even if Centrelink benefits are not a concern, certain products will retain the features that made them attractive in the first place, such as a lifetime annuity which makes guaranteed payments until death, said Martin.
“The Federal Government has indicated that pensions and annuities would be streamlined but has yet to provide details about this.
“Annuitants should wait until the Budget proposals are finalised before making drastic moves. The Budget proposals are by no means finalised and changes can be expected,” said Martin.
-ends-
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Notes to editors:
- Aviva Australia is a group of two specialist financial services companies: Navigator and Norwich Union Life Australia Ltd. Portfolio Partners is the Australian funds management arm of Aviva plc. Through these companies we provide products and services in the areas of wealth creation and wealth protection for more than 300,000 customers throughout Australia.
- Globally, Aviva Australia is part of Aviva plc, the world's sixth 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$77.6 billion, and more than A$683.9 billion of assets under management (as at 9 January 2006). The group has approximately 59,000 employees and 30 million customers worldwide.
- The information in this document reflects Navigator Australia Limited's ('Navigator') ABN 45 006 302 987 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 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 and it is not a substitute for professional advice. A PDS is available from NULIS or your financial adviser. Applications to invest in investment product(s) through the investor directed portfolio service ("IDPS"), operated by Navigator, must be made by completing the application form attached to the applicable IDPS Guide Offer Document and Investment Allocation Authority. Before making an investment decision on the basis of the information above, a prospective investor needs to consider, with or without the assistance of a professional adviser whether the information is appropriate in the light of their particular investment needs, objectives and financial circumstances. Aviva does not receive any remuneration in relation to the provision of information available from this press release which is of a general nature only.