Standard & Poor’s Fund Services rates the Challenger Guaranteed Income Plan (Liquid Lifetime) as ‘STRONG’. The rating reflects the product’s solid income profile and its ability to deliver a constant real income level for the rest of an investor’s life.
Liquid Lifetime is a lifetime annuity that provides a guaranteed regular income for the rest of the investor’s life and, if selected, the lifetime of a second person (subject to the counterparty risk of the issuer, Challenger Life Company Ltd). The income payment amount is set at the issue date of each policy, and increases annually in line with the consumer price index. The income rate is dependent on the age and gender of the policyholder(s) and the payout option selected.
“Unlike a number of alternative retirement solutions issued domestically over the past 36 months or so, Liquid Lifetime offers investors income certainty and the certainty that income payments will keep pace with inflation. Based on our analysis, we believe it can also provide a superior expected income profile in most market scenarios with a lower degree of risk,” said S&P Fund Services analyst, Rodney Lay.
However, Mr Lay added “In the event of death, or if an investor chooses to withdraw early, Liquid Lifetime will only have a commutation value in the first 15 years. This is in contrast to a number of the recently issued retirement solutions. In our view, Liquid Lifetime may not be appropriate for funds that retirees may wish to bequest to their children or estate. We view Liquid Lifetime as a solid expense-requirement solution, well suited to meeting a retiree’s basic living expenses for the rest of their life. Given the very long-term nature of the investment, investors should be comfortable with Challenger Life Company Ltd’s credit risk.”