As Australia’s tax landscape changes, investment bonds offer advisers another pathway for accumulating and transferring wealth.

For many years, investment bonds have occupied a relatively small corner of the Australian investment landscape. While familiar to some advisers, others may have had limited reason to consider them alongside more commonly used structures such as superannuation, personally held investments, property and trusts.

That conversation is changing.

Recent reforms to the taxation of superannuation, capital gains, negatively geared property and potentially, discretionary trusts have brought renewed attention to the structures through which Australians accumulate and transfer wealth.

The 2026 Federal Budget, for example, included significant changes to capital gains tax and negative gearing arrangements, while changes to the taxation of large superannuation balances have also altered the considerations for some investors.

These reforms do not automatically make one investment structure preferable to another. They do, however, reinforce an important advice principle: where an investment is held can be just as important to a client’s after-tax outcome as what they invest in.

Against that backdrop, investment bonds are receiving renewed attention.

But for advisers who have not regularly used them, an important question comes first: what exactly is an investment bond, and how does it work?

Let’s start with the structure, not the name

One of the first misconceptions to address is the word “bond”.

An investment bond is not a bond in the conventional fixed-income sense.

Instead, an investment bond is a life insurance policy with an investment component, issued by a life insurance company or friendly society.

The investor contributes capital to the policy and selects from the investment options made available by the issuer. Depending on the product, these may include Australian and international shares, fixed interest, property, cash, diversified portfolios and other investment strategies.

This means an investment bond can potentially accommodate a range of risk profiles. The defining characteristic is not the underlying asset allocation, it is the tax and legal structure surrounding those investments.

Understanding that distinction is fundamental.

A tax-paid investment

Perhaps the most important characteristic of an investment bond is that it is a tax-paid investment.

With many personally held investments, income and realised capital gains flow through to the investor and may need to be included in their individual tax return every year. The amount of tax ultimately payable depends on the investor’s circumstances and marginal tax rate. This can require investors and their advisers to keep track of different components of investment income, distributions and realised capital gains for tax purposes.

An investment bond works differently.

Tax on assessable investment earnings within an investment bond is generally paid by the issuer, at a headline tax rate of up to 30%, rather than being distributed to the investor each year and the investor being taxed at their personal, marginal tax rate.

Importantly, the investment bond provider is responsible for managing the tax obligations within the investment bond, including the tax treatment of investment income and realised gains generated by the underlying investments. This means the investor does not need to manage these underlying tax positions or include annual investment earnings from the investment bond in their personal tax return.

The actual effective tax rate paid by the issuer may be lower depending on factors such as the underlying investments, deductions, franking credits and tax management within the portfolio of investments selected by the investor.

For clients, this means that unlike investing directly in assets such as shares, ETFs, managed funds or term deposits where dividends, distributions or interest may need to be included in the investor’s personal tax return each year, investment earnings in an investment bond do not create annual taxable distributions that need to be included in their personal tax return. Instead, tax on investment earnings is paid within the investment bond structure. This can make investment bonds particularly relevant for long-term wealth accumulation where a client’s marginal tax rate is higher than the tax rate or effective tax rate applying within the investment bond.

This tax simplicity may become increasingly relevant if proposed Federal Budget changes affecting certain discretionary trust structures are enacted. Depending on the final form of the legislation, trustees may face additional requirements to track, manage and report different tax positions and components within the trust.

The combination of tax efficiency and administrative simplicity can make investment bonds particularly relevant for long-term wealth accumulation where a client’s marginal tax rate is higher than the tax rate or effective tax rate applying within the investment bond.

The 30% headline rate, however, does not automatically mean an investment bond will deliver a better after-tax outcome. Advisers still need to consider factors such as asset allocation, fees, investment performance, timeframe and the client’s individual tax circumstances and compare the overall benefits and trade-offs of different ownership structures.

Understanding the 10-year rule

Investment bonds are designed as long-term investments, with an important tax benefit available once the investment bond has been held for at least 10 years.

Investors can access their money at any time, but it’s important to understand the personal tax consequences on the earnings component of any withdrawals within the first 10 years. In summary:

• Years 1–8: all of the relevant earnings component of the withdrawal may be assessable in the investor’s personal tax return.
• Year 9: two-thirds of the relevant earnings component of the withdrawal may be assessable
• Year 10: one-third of the relevant earnings component of the withdrawal may be assessable
• After 10 years: withdrawals are tax-paid, with no additional personal tax on the investment earnings, provided the relevant requirements are met.

Where earnings are assessable, the investor may also be entitled to a 30% tax offset for tax already paid within the investment bond, to eliminate any double taxation effects.

Importantly, the 10-year rule does not mean the money is locked away for 10 years. Unlike superannuation, investment bonds are not subject to preservation rules, so investors can generally access their capital at any time.

The 10-year period is therefore a tax consideration, rather than an access restriction.

The 125% opportunity: an important technical detail

Understanding the 10-year rule also requires understanding what is commonly called the 125% opportunity.

Before we look at how the 125% opportunity works, it’s important to understand what an investment year is. In summary, an investment year starts on the day the investment bond is established and concludes at the following annual anniversary date. For example, if your investment bond commenced on 1 June 2026, your next anniversary date would be 1 June 2027.

Firstly, there are no caps or rules on the level of investment that can be made in an investment bond in the first investment year. For example, you can start an investment with $20,000 on 1 June 2026 and make additional contributions during the first year of $100,000. There are no caps or rules to consider when making contributions in the first investment year.

After establishing an investment bond and in the second and subsequent investment years, an investor can generally continue making contributions without restarting the original 10-year period, provided contributions in an investment year do not exceed 125% of the contributions made in the previous policy year.

For example, if $20,000 is contributed in the first investment year, up to $25,000 could generally be contributed in the following investment year without restarting the 10-year period.

If contributions exceed the 125% amount, the investment bond will be treated as having recommenced for tax purposes from the beginning of that investment year.

This makes contribution planning important.

It also means advisers should distinguish between two separate concepts: the initial investment, which is not subject to the annual 125% formula in the same way, and subsequent contributions, which need to be managed if maintaining the original commencement date is important to the strategy.

Example below provided by Generation Life:

Jane establishes an investment bond on 18 January 2001 and contributes $10,000 in investment year 1. Below is a summary of the allowable contributions Jane could make to maximise the 125% opportunity every subsequent year:

It’s important to note: If contributions in the second and subsequent investment years exceed 125% of the previous investment year’s contributions, then the start date of the 10-year rule resets to the beginning of the year that the excess contributions were made. Resetting the 10-year rule start date will mean that the full tax benefits of the investment will be delayed.

Example: If Jane contributes $40,000 on the 24 April 2005 in bond year 5 and exceeds the allowable contribution, she will reset her subsequent bond year to year 1 on the 18 January 2005.

Example continued: What if Jane only contributes $8,000 every year from year 2 and $3,000 from year 7?

Jane’s allowable contribution reduces in year 3 as she only contributed $8,000 in year 2. Her allowable contribution further reduces in year 8 as she only contributed $3,000 in year 7.

The flexibility to switch investment options

Another important feature of investment bonds is the ability to switch between investment options without triggering a personal capital gains tax (CGT) event for the investor.

With personally held investments, selling one investment to move into another can trigger a CGT event. Within an investment bond, investors can switch between the investment options available without personally realising a capital gain each time they make a change.

This provides flexibility to adjust an investment strategy over time. For example, a client may switch from growth-oriented investments to more defensive options as they approach their goal or rebalance their portfolio as their circumstances change.

For long-term investors, this ability to switch investment options without triggering personal CGT can be a valuable feature of the investment bond structure.

Where can investment bonds sit alongside super?

Investment bonds and superannuation should not necessarily be viewed as substitutes.

Superannuation remains one of Australia’s most concessionally taxed investment environments and provides benefits that investment bonds do not replicate.

But superannuation also operates within a specific regulatory framework. Contribution caps, preservation requirements, balance thresholds and rules governing the taxation of contributions, earnings and benefits all influence how it can be used.

Investment bonds operate outside the superannuation system.

They generally do not have the same contribution caps or preservation requirements, and their taxation is governed by a different legislative framework.

For advisers, the relevant question may therefore be less about choosing superannuation or an investment bond and more about understanding whether different structures can perform different roles within a client’s broader wealth strategy.

Recent legislative reform has made that structural question increasingly relevant.

More than an accumulation vehicle

Although tax-effective wealth accumulation is often the starting point for understanding investment bonds, the investment bond’s structure can also create unique estate-planning opportunities.

Most investment bond providers offer the ability to nominate beneficiaries to receive proceeds following the death of the life insured (normally the investment bond owner).

Some investment bonds may also offer a future transfer option, allowing ownership of the investment bond to automatically transfer to another person or entity when a specified future event occurs (which may include the passing of the owner). Conditions may also be attached to the recipient accessing funds from the investment bond. This can provide greater control over when wealth is transferred and when the intended recipient gains access to the investment. Investment bonds can also be used for long-term goals extending across generations, including investing for children or grandchildren, saving for education and other future financial objectives.

These characteristics mean the structure can potentially address several planning considerations simultaneously: investment, taxation, access and wealth transfer.

That combination is one reason investment bonds warrant understanding as a distinct product category rather than simply as another managed investment.

Looking beyond asset diversification to structural diversification

The recent tax reforms have not changed the fundamental mechanics of investment bonds.

What they have changed is the environment in which advisers are assessing those mechanics.

When established strategies are affected by changing thresholds, tax rates or concessions, advisers may need to look more closely at the diversification of a client’s wealth across different tax structures.

That does not mean abandoning established structures or automatically directing capital towards investment bonds.

Instead, it means considering a broader question: “Does the way my client’s wealth is structured remain appropriate for their objectives, timeframe, access requirements, tax position and estate-planning needs?”

For some clients, investment bonds may form part of the answer. For others, they will not.

The starting point is understanding precisely what they are: a long-term, tax-paid investment structure operating under life insurance legislation, with distinctive features and benefits governing taxation, contributions, withdrawals and wealth transfer.

As Australia’s tax landscape evolves, that knowledge gives advisers another structure to assess when determining how clients can accumulate, manage and ultimately transfer their wealth.

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Disclaimer: Generation Life Limited (Generation Life) AFSL 225408 is the product issuer and provides general financial product advice and other services related to investment life insurance products and life risk insurance products. Any superannuation general financial product advice provided is by Generation Development Services Pty Limited ABN 14 093 660 523 (GDS) as Corporate Authorised Representative, No. 001317211 of Evidentia Financial Services Pty Ltd AFSL 546217 ABN 97 664 546 525 (Evidentia). The information provided is general in nature and does not consider the investment objectives, financial situation or needs of any person and is not intended to constitute personal financial advice. The product’s Product Disclosure Statement (PDS) and Target Market Determination (TMD) are available at www.genlife.com.au and should be considered in deciding whether to acquire, hold or dispose of the product. Superannuation products’ PDSs, offer documents and TMDs are available from the websites of their product issuers. Professional financial advice is recommended. Past performance is not a reliable indicator of future performance.  Generation Life, GDS and Evidentia do not make any guarantee or representation as to any particular level of investment returns. Generation Life does not accept any responsibility or liability for superannuation general financial product advice provided by GDS. Generation Life’s investment bonds can provide certainty as they are governed by legislation that has changed infrequently and can be appropriately structured to bypass an estate and be protected in case of bankruptcy of the life insured. Investments carry risks.

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Investment-linked lifetime annuities challenge the idea that retirees must choose between enjoying their retirement and leaving a legacy.

Australia’s great wealth transfer is well underway. An estimated $5.4 trillion is expected to pass from those aged 60 and over to younger generations within the next two decades.^[1]

In 2024, around $150 billion was transferred and this is forecast to rise to $500 billion per annum by 2044,^[2] with more than 80% of inheritances going to individuals aged 50 and over.^[3]

With such a significant intergenerational shift in wealth, the role of financial advice has never been more critical. It’s no longer just about how to accumulate, it’s about ensuring the right assets go to the right people, at the right time, without unnecessary tax, legal disputes or financial mismanagement.

Importantly, wealth transfer is not a single event. It is the outcome of a well-structured financial strategy. The real question is not “How do you prepare for a wealth transfer?”, but rather “How do you build a financial plan that delivers the right outcomes?”

Modern families, modern challenges

Family structures are becoming increasingly complex, and estate planning must evolve accordingly.

Divorce rates are rising, with nearly 200,000 Australians filing for divorce between 2020 and 2022 – the highest level in over a decade.^[4]

These dynamics are reshaping how advisers need to think about wealth transfers.

In fact, the complexities of blended families have been linked to an 80% increase in family disputes over wills and estates over the past decade.^[5] Adding to this, a 2022 ruling by the Victorian Supreme Court reinforced that parents may have a “moral duty” to consider children from previous relationships, even if those children can later contest the estate.^[6]

Supporting loved ones with additional needs

The challenge becomes even more pronounced when clients have children or other loved ones with additional needs.

The traditional cycle of ageing where adult children support their parents, does not apply in these scenarios. Instead, your clients may be responsible for ongoing care of others well into their own retirements, while also wanting to plan for what happens when they are no longer here.

Guiding clients through this process is complex and deeply emotional. You are not only structuring financial outcomes – you are helping clients secure the long-term wellbeing and dignity of someone they care about.

Looking ahead, the scale of this issue is growing. By 2099, an estimated four million Australians will have a severe or profound disability. This is more than triple the number in 2009.^[7]

While improvements in care and accessibility are positive, they also introduce additional planning complexities. At the same time, many traditional financial solutions designed for non-dependant adult children particularly those with nevertheless, special needs or financial vulnerabilities, are becoming less effective.

In Australia^[8]:

• Nearly one in five people live with a disability
• One in three of those individuals has a severe or profound limitation

For many parents, one of the greatest concerns is simple – will my loved one be financially secure when I’m gone?

Why traditional structures may fall short

As family dynamics and client needs evolve, so too must the tools used to support them. Challenges financial advisers are facing include:

• Traditional estate planning approaches increasingly being tested; both legally and emotionally
• Increased complexity when planning for modern day family dynamics, complex family structures and blended family scenarios
• Providing some certainty to clients needing to support children or loved ones with additional needs

Wills and trusts remain important, but they can fall short in delivering certainty. They are frequently contested, misinterpreted, or reliant on third-party actions.

For clients, particularly those with vulnerable beneficiaries and complex family structures, the overall depleted certainty can leave them harbouring ongoing anxieties.

Expanding the estate planning toolkit

This is where alternative structures come into focus.

Investment bonds, for example, are increasingly being used as estate planning tools due to their flexibility and tax advantages.

They can be appropriately structured as non-estate assets that bypass probate, likely to reduce the risk of disputes. They also provide greater control over how and when wealth is transferred, without the administrative complexity of a trust.

But there is another, less commonly considered approach emerging in advice strategies.

A different lens: Providing a loved one a paycheque for life

Investment-linked lifetime annuities are typically used to provide retirees with a regular income stream for life, complementing superannuation and the Age Pension.

However, advisers are increasingly exploring their use in a different context – to provide a structured, ongoing income stream to a loved one after the client is gone.

Rather than transferring a lump sum, which may be easier to mismanage, contest or deplete, this different approach reframes the wealth transfer as an income outcome.

It shifts the focus from – “How much is left?” to “How is it delivered, and how long will it last?”

This has led to a growing uptake of lifetime annuities as tools for a controlled, predictable “paycheque for life” – a lasting legacy for life.

Planning for their financial future, in a different way

Investment-linked lifetime annuities offer a level of innovation that’s not often found in traditional financial solutions; they are flexible and can be creatively applied in ways that cater to any family situation.

When setting up a lifetime annuity, the investor can choose their payment frequency and have a choice to invest in professionally managed options that they can switch between over the life of the annuity. Importantly, they can also elect a reversionary beneficiary that will be paid a lifelong income.

For some, they won’t require this level of tailored planning; straightforward solutions can work well. However, for those looking to ensure a steady stream of income for a loved one – for example, a child with a disability, or a loved one with a complex mental health history – this could be the ideal fit. Ultimately, the annuity provides for the recipient and leaves the investor free to enjoy their final chapters knowing that their loved one will be looked after when they’re gone.

Bringing this to life

Financial advisers can listen and understand their clients’ priorities, then set up lifetime annuities that can deliver to their unique needs. For instance, an adviser can set up a recipient with a lump sum or a lifelong income stream. For an income stream, they can specify to whom it goes, whether all or a portion of the income continues and how it is invested now, with the flexibility to change this over the course of their client’s lifetime as well as changing it to match the reversionary beneficiary’s risk profile upon transfer.

Case Study 1: Meet Wendy

Wendy is 72 years old and currently has $50,000 in savings, a $500,000 account-based pension and $30,000 in car and contents.

Despite these assets, Wendy is hesitant about her spending as she worries about her daughter, Jennifer.

Jennifer is 52 years old and has a history of a complex mental health disorder. This impacts her ability to spend her income within her means. Based on Jennifer’s history, Wendy is worried that there is a high likelihood Jennifer could bankrupt herself unless she has a regular, long-term stream of income after Wendy passes away.

By working with a financial adviser, Wendy sets up an investment-linked lifetime annuity for herself using $200,000 that she withdraws from her account-based pension. Wendy nominates Jennifer as the reversionary beneficiary on the annuity, which will provide an income guaranteed for Jennifer’s life after Wendy passes away.  Wendy doesn’t need to worry about anyone else trying to access Jennifer’s future income source. This is because an investment-linked lifetime annuity offers the protections of a life insurance policy, including from bankruptcy and estate claims.

This way, Wendy has greater confidence to enjoy her retirement to the fullest. She knows that she will have income for herself, but also a regular income stream for Jennifer that will serve as a safety net after Wendy passes away.

Case study 2: Meet Sophia

Sophia is 73 years old and single. She has a son, Paul, who is 50 years old. Sophia is a self-funded retiree and a homeowner, and she currently has $360,000 in an account-based pension, $40,000 personal assets and $350,000 cash at bank.

Sophia is concerned about her retirement spending and would like to gain access to the Age Pension.  She also worries about her son Paul, who is bad with money.

Sophia would like to secure Paul’s future, including by diminishing the potential for Paul to misuse a future lump sum inheritance.

By working with her financial adviser, Sophia sets up an investment-linked lifetime annuity of $300,000 and a funeral bond of $15,750 from the money she had in the bank. She nominates Paul as the reversionary beneficiary providing regular income for them both at different times.

Comparing Sophia’s first year income

By setting up an investment-linked lifetime annuity, Sophia receives an immediate uplift in annual income of $16,023, including an Age Pension uplift of $7,812.

Comparing Sophia’s annual income and cumulative income with and without an investment-linked lifetime annuity until age 100

By bringing forward Age Pension eligibility by four years, she receives an additional $45,369 in cumulative Age Pension by age 77. Sophia also receives an additional $630,084 in cumulative income by Age 100.

What if Sophia passes away at age 93…

Sophia receives a total of $443,807 in cumulative income until she passes away at age 93. Paul, now age 70 himself, will receive a total of $464,430 until his life expectancy and continue to receive an income for life after that. Importantly, there is no tax on earnings and concessional taxation treatment on the income payments should their income exceed SAPTO.

Case study 3: Meet George

George is 88, a homeowner in Port Macquarie, living alone following the passing of his wife, three years ago. His two adult children live in Sydney and visit infrequently, typically once a year at Christmas.

As George has aged, maintaining his home and managing day-to-day tasks has become increasingly difficult, and he has begun to feel isolated. His neighbour and a father of three, Sam, has stepped in, regularly helping with groceries, home maintenance, and providing much-needed companionship.

George is clear in his intention: he would like to recognise Sam’s support by providing him with a lifelong “paycheque for life,” while ensuring this arrangement cannot be challenged by his children. At the same time, George intends to leave his home, remaining superannuation balance, and other non-super assets to his two children, allowing him to support Sam without compromising his broader estate planning objectives.

By working with a financial adviser, George restructures part of his retirement savings; withdrawing a portion of him account-based pension and setting up an investment-linked lifetime annuity. He nominates Sam as the reversionary beneficiary.

This structure allows George to create an income stream guaranteed to be paid to Sam for life after George passes away, rather than leaving a lump sum that could be contested. Importantly, as an investment-linked lifetime annuity is issued under a life insurance structure, it can be established as a non-estate asset – helping to reduce the risk of estate disputes and providing additional protection, including in the event of bankruptcy.

For George, this approach delivers certainty and control, ensuring his wishes are carried out, and that Sam receives a legacy for life.

Thinking outside the box

Investment-linked lifetime annuities challenge the idea that retirees must choose between enjoying their retirement and leaving a legacy.

For financial advisers, this presents an opportunity to rethink beneficiary planning. As client needs evolve, whether its supporting dependent children, protecting vulnerable loved ones or planning for legacies to last a lifetime, strategies must evolve to deliver more flexible, intentional and client-aligned outcomes.

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Notes:
[1] JBWere Australia, Family Advisory and Philanthropic Services, The Bequest Report – Reshaping Australia by passing on more than assets July 2024, accessed 20 March 2025
[2] Ibid
[3] Grattan Institute, The story of inheritances in Australia – and why it needs to change https://grattan.edu.au/news/the-story-of-inheritances-in-australia-and-why-it-needs-to-change/, 20 August 2019 accessed 1 August 2025
[4] Sydney Morning Herald, ‘Divorce applications up as marriages hit the rocks’, https://www.smh.com.au/national/divorce-20220628-p5axco.html 3 July 2022 accessed on 15 April 2025.
[5] Australian Financial Review, ‘Big increase in inheritance feuds among blended families’, https://www.afr.com/wealth/personal-finance/big-increase-in-inheritance-feuds-among-blended-families-20191212-p53jbs 27 December 2019 accessed on 15 April 2025.
[6] Australian Financial Review, ‘Court enforces rights of stepchildren in blended families’ https://www.afr.com/wealth/personal-finance/court-enforces-rights-of-stepchildren-in-blended-families-20220311-p5a3u5, 16 March 2022, accessed on 15 April 2025.
[7] ‘Disability expectations – Investing in a better life, a stronger Australia’ – Price Waterhouse Coopers, November 2011, accessed 17 June 2024 https://www.pwc.com.au/industry/government/assets/disability-in-australia.pdf
[8] Disability statistics, accessed 17 June 2024  https://www.aruma.com.au/about-us/about-disability/disability-statistics/

Generation Life Limited AFSL 225408 ABN 68 092 843 902 (Generation Life) is the product issuer, provides general financial product advice and other services related to investment life insurance products and life risk insurance products. Any superannuation general financial product advice provided is by Generation Development Services Pty Limited ABN 14 093 660 523 (GDS) as Corporate Authorised Representative, No. 001317211 of Evidentia Financial Services Pty Ltd AFSL 546217 ABN 97 664 546 525 (Evidentia). The information provided is general in nature and does not consider the investment objectives, financial situation or needs of any person and is not intended to constitute personal financial advice. The product’s Product Disclosure Statement and Target Market Determination are available at www.genlife.com.au and should be considered in deciding whether to acquire, hold or dispose of the product. Superannuation products’ PDSs, offer documents and TMDs are available via the websites of their product issuers. Professional financial advice is recommended. Generation Life, GDS and Evidentia exclude, to the maximum extent permitted by law, any liability (including negligence) that might arise from this information or any reliance on it. Generation Life, GDS and Evidentia do not make any guarantee or representation as to any particular level of investment returns or income, pay back periods or age pension entitlements. Generation Life does not accept any responsibility or liability for superannuation general financial product advice provided by GDS. Past performance is not an indication of future performance. Government entitlements and benefits referred above may not apply to all individuals and may vary depending on an individual’s (or couple’s) personal circumstances which may change over time. All decisions regarding social security assessment for individuals will be made by Centrelink or the Department of Veterans’ Affairs officers based on social security law and the circumstances of the individual at the time of claim. All scenarios have been prepared in good faith based on Generation Life’s understanding of laws, taxes, fees, social security and aged care assessment, rates and thresholds and product features known as at 1 January 2026 unless specified otherwise. All Age Pension entitlement calculations include pension and energy supplements.

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Robert Coulter

Generation Life has appointed Robert Coulter as National Key Accounts Manager, bolstering its distribution capability across licensees, financial advisers and key wealth management and institutional providers, as they navigate one of the most significant wealth and retirement shifts in generations.

In his new role, Mr Coulter will focus on platform and institutional collaboration, APL positioning, and driving further adviser adoption of Generation Life’s investment bond and investment-linked lifetime income solutions.

He brings over two decades of experience across wealth management, superannuation and financial advice, with a proven track record in building high-value relationships between licensees and platform owners and managers, delivering growth across institutional and intermediary channels.

He joins Generation Life from Allianz Retire+, where he served as Head of Key Accounts, leading strategic product approvals, securing key platform and licensee partnerships, and achieving APL inclusion across leading AFSLs to support the launch of retirement income solutions. He has previously held senior roles at Ignition Advice, Financial Advice Association Australia, AMP, ING, BT Financial Group and MLC Australia..

Brendon Rodda, General Manager of Distribution at Generation Life, said: “Robert is one of the most respected distribution leaders in the market, and we’re thrilled to have him on board. He’s spent more than 20 years building the kind of lasting relationships that advisers and licensees value most, and he understands what it takes to translate those relationships into meaningful outcomes for clients.

“It’s a hugely exciting time to be joining Generation Life. The business is rapidly expanding, adviser demand is at record levels, and the tax and retirement landscape is shifting in ways that play directly to our strengths. Robert will play a key role in sustaining our growth momentum while continuing to deliver the high-quality services our advisers and licensees expect.”

The appointment comes amid growing adviser demand for tax-effective, retirement income solutions, as the shift from accumulation to decumulation and the new superannuation tax settings reshape how advisers structure long-term wealth and retirement strategies for their clients.

Robert Coulter, National Key Accounts Manager, Generation Life, said: “Generation Life has built an outstanding reputation for delivering flexible, tax-effective investment solutions for Australians, and its position in the market right now is genuinely compelling. Advisers are looking for solutions that can help them navigate an increasingly challenging retirement and tax environment, and few businesses are better placed to offer that.

“My focus has always been on building strong, trusted relationships with platforms, institutional providers, licensees, and advice practices. I see a significant opportunity to deepen those alliances and help advisers deliver greater certainty and long-term value for their clients. I’m looking forward to building on Generation Life’s strong momentum across the advice and wealth channels.”

Generation Life recently reported quarterly sales of $375 million for the period ending 31 March 2026, up 57% on prior corresponding period (PCP), with funds under management increasing to $5.3 billion, up 35% on PCP. On a rolling 12-month basis, inflows reached $1.415 billion, up 58%, reflecting sustained growth and strong adviser engagement.

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Advisers can gain a clearer understanding of lifetime annuities and how they can be effectively integrated into client portfolios.

For many financial advisers, lifetime annuities have long sat in the “too hard” basket.

They’re often thought of as outdated products: with rigid structures, poor value for money and require uncomfortable client conversations about loss of control. In practice, many advisers learned to work around them – building retirement strategies almost entirely from account-based pensions, supplemented by the Age Pension where available.

It is estimated that over five million Australians planning to retire within two decades, joining more than four million already over the Age pension eligibility age of 67.^[1] Yet, we have seen that take-up of lifetime income products generally remains extremely low; nearly 90% of Australians over 50 are not using – or haven’t heard of – lifetime annuities, and only 3% of retirees have secured an income stream guaranteed for life.^[2]

That scepticism wasn’t irrational. The lifetime annuities of old earned their reputation.

As noted in a Firstlinks article, “Enthusiasm for annuities, coming from people who are not yet retired, overlooks these limitations… annuities offer no access to capital for unexpected expenses such as health crises or age care.

They offer no residual value to support a grieving young family, and they are not transferable between spouses. In addition, annuities offer low returns because they are usually backed by bonds to generate guaranteed income for an indefinite period. Because an annuity is a promise to pay a regular income for life, there is also the counter-party risk that the provider may not be able honour that promise over the long term.”^[3]

For financial advisers focused on flexibility, control and personalised outcomes, avoidance made sense. But the retirement income landscape has changed – and so have lifetime annuities.

Understanding why advisers historically stayed clear is the first step to reassessing their role today.

A new category has emerged

Regulatory change supported the emergence of a new category of lifetime annuity, with providers such as Generation Life, AMP North, Challenger and Allianz Retire+ each bringing their own iteration to market. These solutions are most commonly referred to as market-linked or investment-linked lifetime annuities.

Unlike traditional lifetime annuities, where annual income payments were generally fixed at a set level or increased each year with CPI, investment-linked structures tie annual income to the performance of underlying investments, providing exposure to a broader range of asset classes, including growth assets. Rather than delivering on a static income profile, payments move over time in line with investment outcomes, offering a potential pathway for income growth throughout retirement.

Importantly, these solutions are not designed to replace account-based pensions. Instead, they are increasingly positioned to sit alongside them – forming part of a more diversified and resilient retirement income strategy.

The result is a different use case. Lifetime annuities are not an all-or-nothing decision, but a tool that can be incorporated within a holistic and layered retirement income strategy. Given that no two retirees are the same, the flexibility to tailor income sources across different time horizons, can help advisers design strategies that better align with individual spending needs, risk tolerances and retirement objectives.

Seven common reasons advisers have avoided annuities – revisited

Reason 1: “My client will lose their capital if they die early”

This has historically been one of the strongest objections from both advisers and clients.

All lifetime annuities offer a death benefit. Gone are the days when clients lose a significant proportion of their savings if they pass away soon after commencing an annuity.

Investment-linked lifetime annuities offer a lump sum death benefit payable to nominated beneficiaries if the policyholder passes away during an eligible Death Benefit Period. Most death benefits aim to return the difference between what was invested into the annuity and what has already been paid out as cumulative income.

Reason 2: “What if the provider can’t honour the annuity for life?”

Counterparty risk has always been front of mind for financial advisers recommending lifetime income.

An annuity is, by definition, a long-term promise. Financial advisers have rightly questioned whether any provider could safely support income payments over decades, particularly through market shocks, demographic shifts and regulatory changes.

In Australia, lifetime annuity providers are regulated by APRA and subject to stringent capital and prudential requirements designed to withstand extreme market events. In Generation Life’s investment-linked annuity structure, each investment option is separate and distinct from other investment options and from the provider’s own assets, such as the management accounts and assets of Generation Life. This means each investment option is appropriately structured for protection from potential adverse outcomes affecting either the provider or other investment options.

While no financial structure is risk-free, today’s regulatory framework and capital governance and oversight requirements are materially stronger than when many advisers first formed their views on annuities.

Reason 3: “Annuities don’t offer value for money”

Value has often been assessed narrowly, using internal rates of return or break-even periods.

Viewed through that lens, traditional annuities struggled to compete with account-based pensions in rising markets. Advisers may be worried about recommending solutions that might appear sub-optimal in hindsight if markets performed strongly or clients passed away earlier than expected.

However, value in retirement is not just about maximising returns; it is about managing risks that markets alone cannot solve — particularly longevity and sequencing risks.

Investment-linked lifetime annuities are designed to return capital as cumulative income over time, often providing higher starting income than traditional annuities. Features such as Generation Life LifeIncome’s LifeBooster ^[4]and LifeIncome Flex,^[5] give financial advisers and their clients the optionality and flexibility to increase starting income tailored to their objectives thus, enabling clients to potentially receive their initial investment back sooner.

Importantly, these solutions can also deliver on behavioural values by improving confidence to spend and reducing the temptation to spend too little. For many clients, this form of “value” may not be fully visible in projections, but it is felt in their lived retirement experiences.

Reason 4: “Annuities are fixed income instruments”

This reason has been well founded historically. Until 2021, lifetime annuities were fixed income instruments.

Traditional lifetime annuities, where annual income is either fixed or linked to CPI changes have limited exposure to growth assets. As a result, financial advisers may often be understandably cautious about recommending products that lock clients into rigid income streams in case of constrained real growth potential.

Over long-term periods of 30 to 50 years, asset classes such as Australian and international bonds, and equities have historically outpaced CPI. While past performance is not a guarantee of future returns, this highlights the importance of having exposure to growth assets as it may deliver higher cumulative income over time.

Source: Generation Life. Starting income is based on a 65-year-old female commencing an investment-linked lifetime annuity with $100,000 and an income redistribution rate of 2.5%. The graph shows the historical performance of various portfolios of an investment-linked lifetime annuity policy. Estimated fees, expenses and costs of investment-linked lifetime annuity are 1.01% p.a. No fees have been taken into account on the CPI-linked or fixed rate annuity. Past performance is no indication of future performance. This illustrates until age 95 only, however an investment-linked lifetime annuity will pay your client an income for life. The starting incomes of the CPI and Nil CPI traditional annuities are based on the rates as at 06/01/2025 commencing with $100,000. Performance of the CPI Linked Annuity is based on historical CPI of the respective period. The level of annual income from the Nil-CPI annuity does not change. However, all income is discounted by CPI of the respective period.

Investment-linked lifetime annuities address this structural limitation by linking changes in annual income to underlying investment performance, rather than fixed or CPI-indexed rates. This allows financial advisers and their clients to access diversified portfolios, including growth assets such as equities, infrastructure and private markets.

Based on the above example, an investment-linked structure may generally deliver higher cumulative income over the medium to longer term compared to traditional fixed annuities, and in many cases may return an investor’s original capital through cumulative income sooner.

Income may rise or fall year to year, but over longer periods, the above is an example of how an investment-linked annuity can provide a pathway for income growth that better supports retirements that may span 30 years or more.

Case study: Comparing a traditional lifetime annuity with an investment-linked lifetime annuity

Meet Karlee and Adam. They are both 65 and entering retirement.

Karlee and Adam would like a reasonable income stream that is sustainable and positioned to grow in line with their living costs. They currently have a combined superannuation balance of $1,100,000 and $10,000 in personal assets.

They would like to spend $100,000 per annum to retire comfortably, with their income increasing over time to keep pace with their living costs.

If solely relying on account-based pensions

Income layering by combining a traditional lifetime annuity and account-based pensions

A traditional lifetime annuity provides a regular income guaranteed for life that is indexed to CPI (in this example). To meet their annual income target, additional drawdown, above the minimum level, from your account-based pension is required. Due to the concessional social security treatment of the annuity, ?they  may receive immediate access to the Age Pension if eligible.

Income layering by combining an investment-linked lifetime annuity and an account-based pensions

An investment-linked lifetime annuity provides them access to assets that can help grow their annual income over time. This means they can potentially drawdown less from your account-based pension to meet their annual income target. Due to the concessional social security treatment similar to a traditional lifetime annuity, they may receive immediate access to the Age Pension if eligible.

Source: Generation Life. Based on a 65 year old couple with a starting superannuation balance of $1,100,000,  $10,000 in personal assets and own their own home. Target annual income and the ASFA Retirement Standard are indexed based on historical changes in the CPI from 1991 to 1998, and the Retiree Living Cost Index from 1998 to 2025, as published by the Australian Bureau of Statistics (ABS). The ASFA Retirement Standard used is ‘comfortable lifestyle’ for a couple as at September 2025. Allocating 40% of the superannuation balance to a CPI-linked annuity based on rates available in January 2026 and an investment-linked lifetime annuity selecting an income redistribution rate of 5%. Account-based pension drawdown amount is to meet the target income, minimum drawdowns do apply. Annual income illustrations are shown in nominal dollars. Age Pension rates and thresholds are effective 01/01/2026. The illustration uses historical investment returns commencing 1st July 1991. Investment-linked lifetime annuity portfolio using back-tested returns of a portfolio consisting of 34.7% Australian shares, 38.39% international shares, 24.72% global fixed interest assets, 1.47% cash and 0.72% other assets. Allocating 60% of the superannuation balance into an account-based pension invested into a 70/30 diversified index portfolio which consists of a 30% allocation to ASX All Ordinaries, 40% to MSCI World Ex Australia Index, 20% to Bloomberg Global Aggregate Bond Index (AUD Hedged) and 10% to Bloomberg Ausbond Composite Index. Estimated administration costs of 0.30% p.a. for the account-based pension and 0.92% p.a. for the investment-linked lifetime annuity  (there are no fees on income from the investment-linked lifetime annuity in the first financial year). Past performance is not a reliable indicator of future performance.

In this example, by allocating 40% of their superannuation balance to an investment-linked lifetime annuity, Karlee and Adam are projected to retain an account-based pension balance of $206,455 at age 100 — providing them with the flexibility to either increase spending in retirement or leave a legacy.

Compared to investing in a traditional lifetime annuity where annual income is indexed to CPI, this strategy is also projected to deliver an additional $199,826 in Age Pension benefits and $1,211,355 in cumulative income (without drawdowns?) by age 100. 

Reason 5: “They’re too complex for clients to understand”

Lifetime annuities have often been perceived as complex, opaque and difficult to explain, especially when compared to the relative simplicity of account-based pensions.

In reality, much of the complexity sits in product design and pricing, not in client experience. Once established, the core proposition is straightforward: exchange a lump sum for income payable for life, with income movements linked to investment outcomes.

For advisers, the key shift has often been positioning annuities as part of a broader strategy, rather than a standalone decision. When framed as one income layer within a retirement portfolio alongside account-based pensions and the Age Pension, client understanding and acceptance tends to improve significantly.

Reason 6: “Tax makes them unattractive”

Tax uncertainty has also contributed to adviser hesitation.

In practice, lifetime annuities receive concessional tax treatment. Earnings whilst within the structure are generally tax free and can benefit from franking credits.

Example: The power of a tax-exempt environment

The annualised return of the S&P/ASX 200 Total Net Return Index was 9.12% over the past decade.
When you add the Franking Credit Adjustment, which applies to the tax-exempt environment, the annualised return is 10.99%. This represents an uplift of 1.87% in annualised return.

Source: Generation Life. Past performance is not an indication of future performance. Graph illustrates the 10-year performance of the S&P/200 Franking Credit Adjusted Annual Total Return Index and the S&P/ASX 200 Net Total Return Index.

There are tax benefits on the income payments too.  Income payments are tax-free if using superannuation and are at least 60 years old. In all other cases, there are tax concessions on the regular payments.

In addition, lifetime annuities can interact favourably with social security means testing, potentially improving Age Pension outcomes or access to benefits such as the Commonwealth Seniors Health Card.

While tax outcomes are always client-specific, this area is often misunderstood rather than unfavourable.

Reason 7: “Annuities are inflexible and set-and-forget”

Perhaps the most persistent myth is that annuities lock clients into rigid, irreversible decisions.

While this was once largely true, modern lifetime annuities offer far greater flexibility than their predecessors. Many now allow investment switching, different income profiles, reversionary beneficiaries, varying payment frequencies, and integration with both superannuation and non-superannuation assets.

Providers such as Generation Life, demonstrate how these features can be combined to support more nuanced client scenarios including couples, phased retirement and changing income needs over time.

Importantly, there is no one-size-fits-all approach. Retirees are different, and individual circumstances vary from person to person. Circumstances also change throughout retirement. It is not a single decision made at one point in time, but a series of small, interconnected choices that shape a member’s confidence, readiness, and lifestyle outcomes.

Investment-linked lifetime retirement solutions also create meaningful financial adviser touchpoints, prompting timely client conversations and equipping financial advisers with the right information at the right moment, strengthening relationships and reinforcing the adviser’s ongoing value.

Example: Complementing risk profiles across retirement income streams

By combining an investment-linked lifetime annuity with an account-based pension, advisers can structure retirement income streams with different risk profiles while maintaining a consistent overall portfolio risk. Rather than viewing risk at the product level, this approach reframes risk at the portfolio level.

For example, consider a retiree allocating $300,000 to a lifetime annuity and $700,000 to an account-based pension.

When a traditional lifetime annuity is used, the annuity allocation is typically backed by defensive assets, requiring the account-based pension to carry a higher proportion of growth assets to meet income objectives. While the combined portfolio may still appear balanced, the growth is concentrated in the account-based pension.

By contrast, an investment-linked lifetime annuity allows growth assets to sit within the guaranteed income layer itself. This can improve income sustainability without increasing the total portfolio’s overall growth/defensive weighting.

There may also be social security advantages in using growth assets within an investment-linked lifetime annuity. This is because the assets test assessment is locked in on the starting balance, regardless of subsequent growth. In contrast, any growth in an account-based pension balance is assessed, which may lead to reductions in Age Pension payments.

The structural advantage is not about taking more risk, but about distributing risk more efficiently across income sources. Growth exposure within the lifetime annuity can support higher and more sustainable income, while the account-based pension can be positioned more conservatively, reducing sequencing and behavioural risk.

For advisers, this highlights the value of investment-linked lifetime annuities as a portfolio construction tool, enabling more flexible income layering and more resilient retirement outcomes

From products to purpose

What is even more powerful than the product changes, is the adviser problem being solved.

Advisers are increasingly dealing with retirees who underspend, de-risk too early and carry persistent anxiety about running out of money. In this context, income guaranteed for life can play a behavioural role as much as a financial one.

Used appropriately, lifetime annuities can help secure essential spending, reduce pressure on high-risk growth assets and give clients greater confidence to use their savings earlier in retirement.

They are no longer about replacing flexibility – but enabling it elsewhere in the portfolio.

A reframed question for financial advisers

The question is no longer “Why would I recommend an annuity?” It is “Which risks does this client need help managing and over what timeframe?”

For some retirees, the answer will still be “none”. For others, a measured allocation to lifetime income may meaningfully improve confidence, sustainability and outcomes. According to Accurium Confidence for Life: A retirement advice framework report,^[6] it is estimated that solutions like Generation Life LifeIncome can provide up to a 41% boost in confidence that retirement spending would last for life^[7] — giving retirees more peace of mind.

Lifetime annuities haven’t suddenly become a default solution. But in a more complex, longer retirement, they have become relevant again as part of a broader, adviser-led strategy.

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——–

Notes:
[1] Deloitte (2024). ‘To close the financial advice gap, we must first appreciate how it can help us’. https://www.deloitte.com/au/en/Industries/financial-services/blogs/close-financial-advice-gap-how-it-can-help-us.html
[2] Based on results from the surveys referred to on page 8 and /or at Source 3 of the Generation Life Reimagining Legacy Guide 2023.
[3] Firstlinks. (2025). ‘Retirement is a risky business for most people. ‘ https://www.firstlinks.com.au/article/retirement-is-a-risky-business-for-most-people
[4] https://genlife.com.au/investor-strategies/building-wealth/more-income-in-the-early-years-when-you-need-it-most
[5] https://genlife.com.au/investor-strategies/building-wealth/lifeincome-flex-created-with-australian-retirees-spending-needs-in-mind
[6] https://www.accurium.com.au/confidence-for-life/
[7] Increase compared to that achieved in a strategy with an account-based pension alone.  According to Accurium Confidence for Life: A retirement advice framework report

Generation Life Limited (Generation Life) AFSL 225408 ABN 68 092 843 902 is the product issuer. This communication is general in nature and does not consider the investment objectives, financial situation or needs of any person and is not intended to constitute personal financial advice. Any superannuation general financial product advice provided is by Generation Development Services Pty Limited ABN 14 093 660 523 as Corporate Authorised Representative No. 001317211 of Evidentia Financial Services Pty Ltd AFSL 546217. The product’s Product Disclosure Statement (PDS) and Target Market Determination (TMD) are available at www.genlife.com.au and should be considered before making an investment decision. Superannuation products’ PDSs, offer documents and TMDs are available via the websites of their product issuers. Professional financial advice is recommended. Generation Life, GDS and Evidentia do not make any guarantee or representation as to any particular level of investment returns. Generation Life does not accept any responsibility or liability for superannuation general financial product advice provided by GDS. Generation Life, Evidentia and GDS believe that the information provided is accurate and reliable, but no warranties of accuracy, reliability or completeness are given (except insofar as liability under any statute cannot be excluded), and exclude to the maximum extent permitted by law, any liability (including for negligence) that might arise from the information or any reliance on it. Statements that are non-factual in nature, including projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions, all of which are subject to change. Investments carry risk. Past performance is not an indication of future performance.

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Felipe Araujo

Retirement confidence among high-net-worth (HNW) Australians has fallen sharply since 2022, according to new research commissioned by Generation Life, as evolving superannuation and tax settings emerge as a major source of uncertainty in long-term financial planning.

The 2025/26 Navigating Uncertainty Report polled the sentiments of more than 650 HNW Australians and 354 financial advisers between October and November 2025^[1]. It reveals broad consensus that Australia’s superannuation system remains strong at its core.

Yet respondents report mounting pressure in the current financial landscape, as frequent legislative adjustments and heightened taxation debate continue against a backdrop of ongoing policy change. Most recently, the passage of Division 296 through Parliament for Royal Assent – set to begin from 1 July 2026 – is a stark reminder that for many Australians, long-term retirement planning must now contend with ever-shorter policy cycles, weighing on confidence even among financially resilient households.

Declining confidence among HNW Australians

A majority of respondents say they feel less confident today than they did in 2022. In comparison to three years ago:

• 71% are now less confident about their financial security
• 69% now feel less confident about retiring comfortably
• 63% are now taking less investment risk with their portfolios

This shift is unfolding amid heightened geopolitical tension, market volatility and rising household budget pressures – factors that continue to influence how Australians plan, adapt and make financial choices.

Yet despite softening sentiment, retirement remains the top financial goal, ahead of wealth transfer, wealth accumulation and lifestyle priorities.

“A secure, comfortable retirement is the ambition of every Australian – it’s their highest financial priority,” said Felipe Araujo, CEO of Generation Life.

“But the journey feels less certain. Trust in Australia’s world-class superannuation system endures, yet confidence in the rules that surround it has weakened – shaped by years of shifting legislative change and taxation debate, of which Division 296 is only the most recent chapter.”

A world-class savings system clouded by uncertainty

While 84% of HNWs agree that Australia has one of the best retirement systems globally, concerns about stability are intense:

• 66% say the rules change too often and are hard to follow
• 61% are not confident the system will build and protect long-term savings
• 63% believe the system is flawed in the way long-term savings are taxed.

This uncertainty is most pronounced among those approaching retirement, with respondents aged 60 and over reporting the lowest levels of confidence. At this stage of life, changes to superannuation rules naturally carry greater potential consequences – affecting how individuals think about their contribution strategy, the timing of retirement and the tax settings that will apply to their savings. But this concern is no longer confined to pre-retirees. Mid-life HNW Australians (30-49) now report the highest levels of systemic pressure and are already adjusting their behaviours in response to continued policy settings, signalling that vigilance is also spreading across generations.

Policy churn now a major pressure point

Australians are now placing far greater weight on how superannuation rule changes influence their near-term decisions – a notable shift from 2024, when inflation dominated household concerns. This is reflected in clear movement across the HNW population, with contribution patterns and advice interactions increasingly shaped by the broader policy environment.

• About one-third of those who reduced super contributions in the past year did so in response to proposed government tax policy changes
• Almost 40% reduced contributions following adviser guidance, indicating greater engagement with advice as rules evolve

Super-tax conversations surpassing retirement and inheritance in advice

This behavioural shift is also reshaping advice demand. Understanding superannuation and tax legislation is now the third-highest driver of advice engagement, ahead of both retirement and legacy planning – even as Australia enters the largest intergenerational wealth transfer in the nation’s history, estimated at $5.4 trillion^[2].

“What we’re seeing is a meaningful shift in the questions Australians want answered,” explained Mr Araujo.

“Super-tax settings have now become a huge focus, alongside retirement and the great wealth transfer on the advice agenda, not because people are changing their goals, but because they want clear direction – certainty – on the rules that frame their post-accumulation plans.”

The CoreData study explored this pattern of uncertainty with advisers, and their responses closely echoed the client trends. About 70 per cent had spoken to most or all of their clients about the Government’s Division 296 policy since its announcement in 2023, with conversations commonly centring on a lack of clarity and concerns about supertax policy rules continually changing. However, this increased attention has not translated into broad awareness across the wider HNW population, especially non-advised people.

Division 296: high attention, uneven awareness

Despite extensive public debate and media focus at the time of fieldwork in 2025, 44% of HNW Australians said they were not familiar with the Division 296 super tax. Among those who were familiar:

• 65% said they supported the proposal
• 65% said the proposal increased their confidence in the system; just 9% said it reduced their confidence

Advice provides clarity in a shifting policy landscape

This uneven awareness aligns with a broader theme across the study: as policy settings continue to evolve, Australians in ongoing advice relationships show consistently higher familiarity – revealing a clear divergence in how emerging rules are interpreted and understood.

• Awareness of Division 296 sits at 62% among those receiving ongoing advice, compared with 38% among those without an adviser
• Almost a third say advisers help simplify complex decisions, reduce cognitive load and provide reassurance amid uncertainty

Australians receiving professional advice also report significantly stronger financial satisfaction:

• 86% of those with ongoing advice are happy with their financial situation (vs. 55% without)

This sentiment is mirrored in how advisers assess future risk. While 72% of advisers believe future legislative changes will negatively affect HNW investors in general, only 21% believe it will negatively impact their own clients – pointing to confidence in their abilities to adapt structures and strategies over time.

A clearer path forward for retirement confidence

Generation Life’s research shows that while confidence in the superannuation system remains strong, successive rule changes are reshaping how Australians approach their retirement strategies. In this environment, enduring planning structures that offer clarity and stability across investment and retirement decisions become even more important – and Australians are increasingly turning to advisers for clear guidance through evolving policy settings.

Commenting on the broader implications of the findings, Mr Araujo emphasised, “Australians are seeking clearer and more stable policy settings so they can plan with confidence. Rule certainty is fundamental to long-term retirement planning, and with Division 296 now passed through Parliament for Royal Assent, advisers play a critical role in helping to translate such policy shifts into the right structures and decisions for their clients.

“With clear guidance, communication and well-designed long-term investment frameworks, Australians can move forward with much greater assurance.”

——–

Notes:
[1] About the 2025/26 Navigating Retirement Uncertainty Report: The 2025/26 Navigating Uncertainty Report was co-designed by Generation Life, Madden & Assoc., and CoreData, with all fieldwork conducted by the CoreData research team. The survey was undertaken online between October and November 2025 when Division 296 superannuation tax was proposed as at the date of participation. Respondents were sourced through CoreData’s proprietary research panel, supplemented by specialist panel partners. In total, 650 Australian high-net-worth (HNW) investors and 354 financial advisers participated in the survey, completing a structured questionnaire with an average length of 12 minutes. HNW investors are classified as having an investment portfolio over 1 million, excluding superannuation and principal place of residence. All data underwent quality, and validity checks by CoreData for accuracy, consistency and reliability, reducing the risk of error or bias and to enable robust insights.
[2] JBWere (2024), The Bequest Report: https://www.jbwere.com.au/content/dam/jbwere/documents/campaigns/JBWere-Bequest-Report.pdf

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Vincent Stranges

Generation Life has announced the expansion of its investment bond menu with five new options across private markets, geared strategies and global small caps. Detailed in the latest product information sheet, the enhancements provide access to asset classes traditionally reserved for institutional investors, adding greater choice and deepening diversification for investors and financial advisers seeking tax-efficient portfolio construction.

Private markets

Two new private market strategies offer exposure to private credit and unlisted property:

• MPC Wholesale Investments Fund, managed by Metrics Credit Partners, provides private credit exposure through income-generating lending strategies
• Charter Hall Diversified Property Portfolio offers access to high-quality unlisted property with long-term capital-growth potential.

Private assets complement traditional listed equities and fixed-interest exposures by enhancing diversification and smoothing returns across market cycles. Their lower correlation to listed markets and less-frequent valuations can also reduce overall portfolio volatility.

These additions coincide with a growing interest in private markets, with global private capital AUM projected to reach over US$18 trillion by 2027, up from US$10.89 trillion 2022[1]. Australian investors are increasingly turning to private capital markets for better returns, and the new options support that participation in a tax-efficient investment bond structure.

Geared funds

Two additional geared strategies provide professionally managed geared exposures, without personal borrowing or credit implications for investors:

• Generation Life Tax Effective Australian Share Fund (Geared) managed by Invesco
• iShares Hedged International Equity Index Fund (Geared) managed by BlackRock

The funds target a conservative 45 per cent loan-to-value ratio, and all borrowing costs of the fund are tax deductible within the fund to drive tax efficiency. Access to institutional borrowing rates – rather than retail borrowing rates – can further enhance cost effectiveness.

Global small caps

A global small-caps strategy delivers exposure to high-quality smaller companies with long-term growth potential.

• Langdon Global Smaller Companies Fund, managed by Langdon Equity Partners Limited – a specialist global small-cap strategy targeting high-quality companies with sustainable long-term growth characteristics

Small-cap allocations can complement broader global equities by providing exposure to earlier-stage, innovative businesses with differentiated sources of return.

Vincent Stranges, Head of Product at Generation Life, said the enhancements strengthen Generation Life’s position as a pioneer and market-leader in investment-bond innovation.

“Investor expectations have changed. People want access to the tools and opportunities that have driven institutional portfolios, but without the complexity or barriers to entry that usually come with them. That’s exactly what this expansion to our investment menu is designed to achieve.”

“By offering these strategies within an investment bond structure, investors and financial advisers can access them more easily, in a way that supports their long-term goals. Ultimately, it’s about broadening access to high-quality investment opportunities that are genuinely meaningful and aligned with the evolving needs of investors and financial advisers.” Mr Stranges concluded.

As Australia’s leading provider of investment bonds, Generation Life remains committed to delivering forward-thinking solutions that optimise after-tax outcomes and empower advisers and investors to build lasting wealth with confidence.

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Using investment bonds can assist in facilitating intergenerational wealth transfer.

Australia’s great wealth transfer

Australia’s largest intergenerational wealth transfer in history is underway, with an estimated $5.4 trillion expected to be passed on in inheritances over about the next 20 years^[1]. This transition will redefine how advisers approach estate planning.

While 80% of Australians intend to leave a legacy, only one in five have a structured plan to do so^[2]. For many families, particularly blended or complex ones, the question isn’t if wealth will be transferred, but how it can be done efficiently, fairly, and tax-effectively.

The modern challenge of transferring wealth

Estate planning can be emotionally and financially complex. Common challenges include:

• Family conflict: 74% of contested family provision estate claims in Australia had a likelihood of success, rising to 88% for larger estates ($1-3 million)^[3]
• Taxation concerns: Australia’s tax system can be complex and improper wealth transfer planning can lead to significant tax liabilities^[4].
• Cost-of-living pressures: Rising property prices, mortgages and everyday expenses have made it harder for younger Australians, seeing more parents and grandparents stepping in to ease financial strains.^[5]

The cost of supporting the next generation is growing. Research shows it takes 12 years to save for the average unit deposit and 16 years for the average house.^[6]

These realities appear to be shifting intergenerational wealth transfers from a mostly posthumous event to an increasingly living process. More parents and grandparents are seeking to help children during their lifetimes, supporting education, property purchases, or business ventures, without compromising tax outcomes or family harmony.

One of the most flexible and tax-efficient structures enabling all this, is the investment bond.

Investment bonds: A powerful estate planning tool

An investment bond is a tax-paid investment product. Investors contribute an initial investment and can make additional contributions, ad-hoc or through a regular savings plan. The investment can grow within the investment bond based on the investment strategies selected, with earnings taxed within the product at a rate of up to 30%.

After 10 years, all withdrawal proceeds are received tax-free. If a withdrawal is made within 10 years, top up tax may be payable by the investor. This represents the difference between the 30% tax paid within the investment bond and the investor’s marginal tax rate.

Beneficiaries can be nominated so that, in the event of the owner’s death, they can receive the value of the investment directly and tax-free, they may be appropriately structured and the investment can bypass the estate and probate process and potentially avoid will disputes.

Alternatively, investment bonds can provide for the transfer of the investment to a nominated person on death or a future date, without triggering any tax consequences for the recipient.

Key estate planning benefits

Investment bonds therefore sit neatly between the tax efficiency of superannuation and the control of discretionary trusts, offering advisers a balanced estate planning solution. 

Comparing wealth transfer structures

Why investment bonds can excel in today’s tax environment

Although Australia doesn’t have an inheritance tax, many wealth transfers are subject to other taxes. For example, the taxable component of a superannuation death benefit payment to a nominated non-dependant beneficiary is taxed at 15% plus Medicare levy, and any untaxed element can attract tax at 30% plus Medicare levy.

Additionally, the proposed Division 296 tax will apply to earnings on total super balances exceeding $3 million, making superannuation less attractive for larger intergenerational wealth transfers.

By contrast, investment bonds offer:

• A tax-paid environment (up to 30%) independent of personal marginal tax rates
• Tax-free death benefits to nominated beneficiaries
• No potential Division 296 exposure as they sit outside the superannuation system
• No CGT events on transfer of ownership either before or on death.

Future event transfer: planning for precision

Some investment bonds allow investors to schedule the transfer of ownership to nominated recipients on a chosen future date or death of the owner, through a transfer arrangement.

How it works

1. Nominate a transfer trigger – for e.g. death of the owner or last surviving joint owner, or a future date (like a grandchild’s 25th birthday).
2. Automatic ownership transfer occurs, without capital gains or income tax consequences to either the owner or future recipient.
3. 10-year period continuity – the original start date upon transfer is retained for tax-free status.
4. Future access restrictions can be built in – delaying access to funds, establishing periodic income payments, or requiring third-party approval for withdrawals.

This structure gives investors control from beyond the grave, ensuring nominated recipients receive wealth in a controlled and tax-efficient manner.

Case studies in generational wealth planning^[8]

1. Avoiding superannuation death benefit tax

Dianne, aged 79, has two adult children and three grandchildren. She has reached her Superannuation Transfer Balance Cap and has $600,000 superannuation in accumulation phase. Dianne wants to steer clear of the death benefit tax while ensuring fairness and control.

Her financial adviser recommends she establish five investment bonds with her super balance in accumulation phase:

• Two $150,000 investment bonds for her adult children, transferring ownership upon her death.
• Three $100,000 investment bonds for her grandchildren, transferring ownership upon each grandchild turning 25.
• The children are nominated as account guardians to hold the investment on behalf of the grandchildren until they reach 16.

Result: If Dianne passed away at age 93 her children and grandchildren would in total have an additional $60,449 in proceeds and eliminating the death benefit tax, transfers wealth tax-free, and bypasses probate. The investment bonds allow for controlled, direct inheritance transfer.

2. Helping the next generation with housing

Gordon and Mel, both 41, are high-income professionals concerned about their children’s ability to buy a home amid rising property prices.

Their financial adviser recommends establishing two investment bonds with $5,000 each upfront and a Regular Savings Plan of $1,000 per month for ten years. Using a future event transfer feature:

• Each investment bond’s ownership transfers when a child turns 30.
• Access to funds by the child is restricted for an additional 10 years after transfer.
• Gordon and Mel act as withdrawal co-signatories to authorise one-off withdrawals (eg a home deposit) that may be needed during the restriction period.

Result: The couple can provide a meaningful financial head start for their children, while maintaining control and ensuring funds are appropriately used. The tax-paid investment bond structure can provide a tax-effective investment outcome compared to investing personally subject to the top marginal tax rates.

3. Managing complex family dynamics

Margo, aged 77, has three adult children with very different financial situations:

• Sarah (51): financially secure but is taxed at the highest personal marginal tax rate .
• Sam (46): financially unstable and poor with money.
• Jane (42): a single mother with two young children.

Her financial adviser recommends establishing three investment bonds using $1.3 million from superannuation withdrawal proceeds and $200,000 from the sale of her shares and direct investments, each tailored to her children’s needs.

Result: Margo achieves the required outcome for her children without conflict, ensures responsible timing of delivery of proceeds, and eliminates superannuation death tax exposure.

Early wealth transfer: living legacies

Increasingly, investors don’t want their wealth to make a difference after they die, they want to see it make an impact now.

Investment bonds enable living legacy strategies, allowing financial advisers to:

• Help clients support children earlier for housing, education, or business.
• Provide tax-effective gifts while maintaining oversight.
• Reduce the risk of estate disputes, as wealth can be transferred outside the will.

With flexibility to structure future event transfers, future regular income payments, and access controls, investment bonds align perfectly with modern family and tax realities.

Best practice tips for financial advisers

1. Assess suitability and objectives
   Should ensure the investment bond aligns with the client’s estate and intergenerational goals, not just their investment profile.
2. Complement with other structures
   Investment bonds can complement other structures like superannuation and discretionary trusts.
3. Use future event transfers strategically
   Can consider structuring conditional access to funds, especially for younger or financially inexperienced beneficiaries.
4. Monitor and review regularly
   Could review nominations and access conditions after major life events (eg marriages, births, divorces).
5. Communicate clearly with clients and beneficiaries
   Provide education about how the investment bond operates, its tax treatment, and how it fits within the broader estate plan.

Conclusion: Building a legacy that lasts

As Australia undergoes a seismic intergenerational wealth shift, investment bonds offer a uniquely flexible and tax-efficient structure for financial advisers helping clients pass on their wealth.

They combine the control of discretionary trusts, tax advantages, and the simplicity of direct investments, without the same limitations of any single other vehicle.

For financial advisers, mastering the strategic use of investment bonds isn’t just about managing money, it’s about shaping legacies that can endure.

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Notes:
[1] JB Were (2024) The Bequest Report
[2] Generation Life (2023) Reimagining Legacy Report
[3] NSW Wills and Estate Helpline (2025) What is the Success Rate of Contesting a Will?
[4] Moiler Wealth (2025), The Hidden Risk of Intergenerational wealth transfer and how to avoid them
[5] ABC News (2025), Cost of Living Sting Lessened by Bank of Mum and Dad
[6] Blackburn, T. (2023). A Marathon to Mortgage: First Home Buyers Need More Than a Decade to Save for a Home, Finder, July 2023
[7] Adapted from Generation Life’s “Generational Wealth” guide, 2024
[8] Ibid

Disclaimer: Generation Life Limited (Generation Life) AFSL 225408 is the product issuer and provides general financial product advice and other services related to investment life insurance products and life risk insurance products. Any superannuation general financial product advice provided is by Generation Development Services Pty Limited ABN 14 093 660 523 (GDS) as Corporate Authorised Representative, No. 001317211 of Evidentia Financial Services Pty Ltd AFSL 546217 ABN 97 664 546 525 (Evidentia). The information provided is general in nature and does not consider the investment objectives, financial situation or needs of any person and is not intended to constitute personal financial advice. The product’s Product Disclosure Statement (PDS) and Target Market Determination (TMD) are available at www.genlife.com.au and should be considered in deciding whether to acquire, hold or dispose of the product. Superannuation products’ PDSs, offer documents and TMDs are available from the websites of their product issuers. Professional financial advice is recommended. Past performance is not a reliable indicator of future performance.  Generation Life, GDS and Evidentia do not make any guarantee or representation as to any particular level of investment returns. Generation Life does not accept any responsibility or liability for superannuation general financial product advice provided by GDS. Generation Life’s investment bonds can provide certainty as they are governed by legislation that has changed infrequently and can be appropriately structured to bypass an estate and be protected in case of bankruptcy of the life insured. Investments carry risks.

Assumptions for Dianne’s case study: Compares investment in a conservative portfolio through both a superannuation fund and investment bond with total return of 4.2% pa before tax. The superannuation fund balance assumes a taxable component value equal to 80% of the total super balance. No drawdowns. Past performance is not an indication of future performance.

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Investment Bonds can offer financial advisers a versatile, tax-efficient investment structure capable of complementing or substituting traditional vehicles such as superannuation and trusts

Introduction

Beyond Super: Why investment bonds are shaping the next era of wealth planning

For more than three decades, Australia’s superannuation system has been in near-constant motion. What began in 1992 with the introduction of the Superannuation Guarantee has since been reshaped by a rolling series of reforms, each altering the rules that govern how Australians save for retirement. From Simplified Super in 2007 to the Transfer Balance Cap in 2017, the pattern has been one of regular intervention.

The major superannuation tax policy changes recently announced by Treasurer, Jim Chalmers is only the latest example. While the measure appears to only target a narrow group upon application, it has reignited wider debate about the stability of Australia’s retirement-savings system and the need for broader, more flexible wealth strategies.

As a result, financial advisers are exploring tax smart strategies as tax and regulatory reforms may increasingly constrain wealth structures. With clients seeking alternative solutions for wealth accumulation and intergenerational transfers, investment bonds continue to gain strong momentum as one of the most flexible and tax-effective options.

Investment bonds present a compelling, tax-effective alternate or complement to superannuation and other investment vehicles. Governed by both Life Insurance and tax legislation, investment bonds combine highly tax-effective investment solutions with strategic flexibility, estate planning advantages, and diversity in investment choice.

Core uses of investment bonds:

• Investing tax-effectively: All earnings are taxed at a maximum rate of 30%. The effective long-term tax rate can be significantly lower depending on the investment options you choose.
• Providing estate and succession planning flexibility and certainty: Transfer wealth to future generations tax-free and with certainty and peace of mind.
• Looking for an alternative to superannuation: There are no limits on how much and when you can contribute to an investment bond. Funds can be accessed at any time, you don’t have to wait until preservation age.
• Managing income levels in private trusts: Earnings generated by an investment bond are retained within the investment bond and need not be declared and distributed.
• Creating an income stream: You can create a regular income stream and there are no restrictions on when you can start the income stream – particularly useful if you are intending to retire early and access to superannuation is not available.
• Qualify for or improve social security benefits: To help manage or improve Government benefit entitlements in particular circumstances.

Legislative & structural overview

Investment bonds: defined

An investment bond is a tax-paid investment vehicle sometimes referred to as an insurance bond providing flexibility, control and access at any time. Investment bonds are offered by a life company structure, meaning they are subject to the Life Insurance Act and relevant tax provisions under the Income Tax Assessment Acts.

Investment earnings are taxed at a maximum rate of 30% within the investment bond. The actual effective tax rate may be lower as a result of the effective tax management practices implemented by the product issuers. No tax is paid by the investor on the investment earnings while they remain invested. Investors also have the flexibility to alter their investment options at any time usually without any switching fees or personal tax implications.

Investment bonds can provide access to a range of investment options to accommodate individual preferences and risk tolerances. Income and growth generated by an investment bond is usually not distributed to investors and held within the investment bond. This can help with managing personal tax assessable income levels and personal tax liability.

It’s for these reasons that investment bonds can offer a powerful, long-term tax-effective way to accumulate wealth for investors.

Consistent legislative stability

Investment bonds have enjoyed stability in their tax legislative framework having largely remained
unchanged since the tax rate was aligned to the company tax rate of 30% in 2001. This contrasts with superannuation, which has had over 30 major changes to its legislation and related government policies since the introduction of compulsory superannuation in 1992.

Superannuation remains a highly tax-effective way for most Australians to save for retirement, offering concessional tax treatment of contributions and favourable tax rates on earnings. But today, in light of potential superannuation reforms such as Division 296, Australians are reminded that complexities and constant changes often bring uncertainty – and that trusted advisers are essential in navigating both.

As legislation shows little signs of stabilising, it’s more important than ever to diversify financial and wealth accumulation strategies. Investment bonds, for example, offer tax advantages, flexibility, and estate and succession planning benefits, along with the track record of legislative certainty, making them a compelling option for those who may be impacted by the possible changing legislative landscape, both now and in the future.

Tax can be one of the biggest costs associated with any investment

Australian investment managers generally report on investment portfolios with a headline (pre-tax return) which does not necessarily reflect consumable returns in the hands of investors.

Investment returns and investment costs are two key factors that investors tend to focus on. But another critical factor is often overlooked – the impact of tax.

Tax is often the biggest cost for investors, and investors can feel very limited by the strategies available to reduce that cost. However, the impact of tax isn’t tomorrow’s problem.

How tax can erode returns:

An investor on the top marginal tax rate can lose up to 47% of portfolio returns to tax and Medicare.

As a guide, an investor who earns a pre-tax return of 5.0%p.a. on a managed Australian share fund may have their after-tax return whittled down to 3.1%p.a., even after allowing for dividend imputation credits.

In effect, 1.9% of the original before-tax 5% return – almost 40% – is lost to tax ^[1]

The compounding effect of this can be significant over time. Not being aware of the effects of tax can have a significant impact on your clients’ after-tax investment returns.

A tax aware approach to investing connects the dots and can reduce the impact of tax by pro-actively managing to reduce tax using a range of implementation strategies.

The reward for investors can be higher after-tax returns without taking on additional investment risk. As less tax means more to invest, the tax savings may compound over time, helping investors reach their financial goals sooner.

Investment bonds can provide a tax-effective solution to grow wealth, with tax on earnings capped at a maximum of 30%. Effectively, they can deliver improved after-tax returns with no additional investment risk.

Latest innovations in investment bonds

Investment bonds continue to deliver a tax-effective solution for building wealth through a range of investment options tailored to suit the investor’s objectives. But the opportunities go much further. Today’s investment bonds are using exciting new strategies to reduce the effective long term tax rate for many growth-oriented investments. In such a case, investors can enjoy the best of the five benefits below:

• A diverse portfolio spread across a variety of asset classes
• Enhanced after tax returns, deepening the benefits of compounding
• The ability to invest to achieve a variety of personal goals
• Access to their funds when needed.

Key tax benefits of investment bonds

1. Maximum tax rate of 30%

Unlike most direct investments — where assessable earnings for personal investors are taxed at their marginal tax rate plus Medicare levy — assessable earnings within an Investment Bond are taxed internally at a maximum of 30%. For clients in the 39% or 47% tax brackets, this represents an immediate tax arbitrage.

2. Effective tax rate reduction – tax optimised investment options

Through active tax optimisation of Investment Bonds, the effective long-term tax rate within some Bonds can be between 10% and 15% p.a. depending on the investment option(s) selected by the investor.

3. A tool against “bracket creep”

Earnings are taxed within the Investment Bond and held as otherwise distributable income that can accumulate.

Investment bonds can help shield clients from being pushed into higher brackets, by not distributing assessable income year-on-year. For clients worried about rising personal tax rates, this can help manage and improve after-tax outcomes.

4. After-tax investment outcomes and compounding returns

The returns from and performance of Investment Bonds are provided on an after-tax basis, unlike many other investments – such as managed funds, shares and term deposits – where the returns are often quoted before tax and are then taxable at your client’s marginal tax rate plus Medicare levy each year.

Over the long-term, the compounding benefit of a lower effective tax rate on earnings generated and retained within an investment bond can be significant when compared to direct investment options where the impact of the tax is generally incurred at a personal level annually, with less remaining to re-invest.

Analysis by one investment bond provider shows that an individual on a 47% marginal tax rate (includes Medicare Levy) can grow an Australian share portfolio by an extra 56% over a 20-year period when the long term average tax rate of investment returns can be lowered to 10%.

5. The 10-year advantage

If the investment bond is held for at least 10 years, withdrawals — including all earnings — are free from any additional personal taxes.

• The 10-year period starts from the investment’s commencement date
• Additional contributions of up to 125% of the previous year’s contributions can be made annually without resetting the 10-year period (the “125% rule”)
• Withdrawals before 10 years may result in an assessment of earnings, but these attract a 30% tax offset, to reduce any top-up tax liability.

6. Flexibility to switch at any time with no personal capital gains tax

Investment Bonds offer flexibility to switch between investment options at any time. Switching within an Investment Bond also does not trigger a personal CGT event. This is because the transactions occur within the investment bond’s tax structure, where the life company accounts for any realised capital gains.

7. Death benefits paid tax-free

Upon the death of the life insured (which is normally the owner, but can be another person), proceeds from the investment bond are paid tax-free to nominated beneficiaries — regardless of their dependancy status. This contrasts with superannuation, where non-dependants can face a death benefits tax of up to 17% (including Medicare levy) on the taxable component.

Additional benefits of investment bonds

• Simple tax reporting – There is no need to provide a tax file number, and no annual tax reporting is required while the investment is held. Furthermore, there is no tax reporting on a withdrawal provided you do not make the withdrawal within the first 10 years.
• Access to the investment at any time – unlike superannuation, an investment bond offers investors complete access at any time – you don’t have to meet any age or retirement requirements to access the investment.
• Protection from creditors – Similar to superannuation, if an investment bond is appropriately structured and owned by an individual and they or their spouse (including de facto spouse) are nominated as a life insured, the investment can be protected from creditors in the event of bankruptcy. This protection applies to the investment bond itself and can apply to proceeds from the investment bond received on or after the date of bankruptcy.
• Peace of mind for funeral expenses – A simple and tax-effective investment designed to help pay for future funeral costs, so to ease the financial burden on loved ones during their time of grief. Funeral bonds are also exempt from asset and income test (up to $15,750 as at 1 July 2025), which can help improve social security benefits.

Diversified strategies across multiple structures

The financial landscape is marked by constant change and growing uncertainty. Long-standing structures such as superannuation, family trusts, and other investment vehicles are increasingly subject to government review and reform.

Now more than ever, diversified strategies across multiple financial structures are critical. This approach not only helps mitigate the risks posed by potential legislative changes, but also provides much-needed flexibility, resilience, and control. As part of a broader diversified strategy, investment bonds are emerging as a powerful, tax-effective vehicle—particularly relevant in today’s financial landscape.

Managing distributable income in trusts

A private, discretionary or family trust can decide to reduce its distributable income if invested in an investment bond. Unlike other investments such as shares, managed funds and term deposits, an investment bond does not distribute taxable income to investors unless a withdrawal is made before meeting the 10-year rule requirement.

There are also no trust or personal capital gains tax consequences when modifying the trust’s investment strategy via an investment bond. While the trust remains invested in an investment bond, there is no annual taxable income in the hands of the trust that it must distribute.

The ‘125% opportunity’

Unlike superannuation where personal contribution amounts are capped and subject to penalty tax rates if exceeded, investment bonds provide much greater flexibility on how much can be contributed to the investment. There are no restrictions with an investment bond on the maximum amount that can be invested, unlike superannuation where the non-concessional contributions cap and the  total balance cap limit investors’ abilities to make additional non-concessional contributions.

With an investment bond, there are no limits on the maximum amount that can be invested in the first investment year, which starts on the day the investment bond is set up. Each subsequent investment year starts on the anniversary date of the investment bond’s initial start date.

Each investment year, additional contributions of up to 125% of the previous year’s contributions can be made without re-setting the 10-year advantage period. This means that these additional contributions benefit from being treated (for tax purposes) as if they were invested at the same time as the initial contribution. They do not have to be invested for the full 10 years to be included as part of the 10-year advantage.

It is important to know that the 10-year advantage will restart if:

• no additional contribution is made in a particular investment year, and an additional contribution is made in any subsequent investment year.

Furthermore, if contributions in an investment year exceed 125% of the previous investment year’s contributions, then that is also possible, however, the 10-year advantage period will restart.

If a client wanted to make additional contributions but did not want to reset the 10-year advantage period on their investment, they could instead start a new investment bond. Alternatively, setting up an investment bond with a Regular Savings Plan and automatically increasing the regular savings amounts each year would provide a simple and effective way to automatically take advantage of the 125% opportunity.

Case Study: Comparing alternative tax structures^[2]

John, 50, is a medical specialist, who given his profession, is subject to malpractice risk. He has surplus income of $50,000 per year after PAYG tax and his earnings put him on the highest marginal tax rate of 47% (including Medicare levy). He also has a super balance of over $3million and, if Div 296 is reintroduced and brought in, some super earnings would be subject to the additional 15% tax.

John recently received a $500,000 death benefit payment from his late mother’s super (after paying his share of death benefit tax). Due to John’s total super balance, he can no longer make non-concessional contributions into his super. He intends to continue working but would like the flexibility to access his funds before fully retiring. He also wants to reduce his working hours from after age 60.

John’s financial adviser puts forward three options for John to invest his death benefit payment proceeds and surplus income in alternative structures. His adviser presents the options along with anticipated after tax proceeds after remaining invested for 15 years, about:

1. Investment company = $3.02million
2. Discretionary trust with a corporate beneficiary = $3.87 million
3. Investment bond = $4.39 million

The numbers are compelling – the investment bond offers an increased return of $1.29 million when compared to the Investment Company and $490,000 more than investing through a private trust with a corporate beneficiary.

By investing in an investment bond, John has:

• The ability to access funds at any time for when he decides to reduce his work hours.
• A tax effective investment structure.
• Simple ongoing administration and monitoring with no set up costs.
• No potential Division 7A issues and requirements to manage that may otherwise arise when utilising corporate structures such as “bucket” companies.
• No deferred tax impact, often the case where corporate entities are used to hold investments.
• The benefit of the investment being protected from creditors in event of bankruptcy.
• The ability to set up the investment a non-estate asset, giving him flexibility in how and when to pass his wealth on.

The opportunity for John’s adviser is clear. Investment bonds provide a strategic and tax-effective solution that preserves flexibility and ensures access to funds at any time. While this case highlights the benefits of tax-effective investing, investment bonds can also deliver strong outcomes in other scenarios — such as intergenerational wealth transfers and estate planning.

Case study assumptions

Assumptions: $500,000 initial investment, $50,000 p.a. contribution, from year 1 to year 15 at John’s 47% MTR including Medicare levy). The graph above compares investment strategies held through a Generation Life Investment Bond, a family trust with a corporate beneficiary and John as the other trust beneficiary, an investment company invested an Australian and international share portfolio over a 15-year period. The returns assume a 12.1% p.a. total return  on the portfolio( before tax) with a franking level of 89.4%, an income return of 3.4% p.a. and growth return of 8.8% p.a. Both the corporate beneficiary and investment company are taxed at a rate of 30.0% as a non-base rate entity for tax purposes. Progressive marginal tax rates for John are used (including 2% Medicare Levy) as at 2024/2025 rates and with other PAYG earnings indexed at 3% p.a. Underlying investment income is assumed to be reinvested and a full withdrawal made at the end of the 15-year period and paid to the investor. Returns are based on historical investment returns and expected tax components. Generation Life does not make any guarantee or representation as to any particular level of investment returns. Past performance is not an indication of future performance.

Conclusion

Investment Bonds can offer financial advisers a versatile, tax-efficient investment structure capable of complementing or substituting traditional vehicles such as superannuation and trusts. With capped tax rates, strategic withdrawal rules, and estate planning flexibility, they can provide prime and tangible after-tax benefits, particularly for high-income earners, retirees with large super balances, and families seeking certainty in wealth transfer.

As the debate about the stability of Australia’s retirement-savings system and the need for broader, more flexible wealth strategies continues, the role of investment bonds as an alternative is poised to expand — making it critical for financial advisers to master the technical details and strategic uses of these products.

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Notes:
[1] Case study source: Generation Life
[2] Stop your investment returns being consumed by tax, Generation Life 2020,

Disclaimer: Generation Life Limited (Generation Life) AFSL 225408 is the product issuer and provides general financial product advice and other services related to investment life insurance products and life risk insurance products. Any superannuation general financial product advice provided is by Generation Development Services Pty Limited ABN 14 093 660 523 (GDS) as Corporate Authorised Representative, No. 001317211 of Evidentia Financial Services Pty Ltd AFSL 546217 ABN 97 664 546 525 (Evidentia). The information provided is general in nature and does not consider the investment objectives, financial situation or needs of any person and is not intended to constitute personal financial advice. The product’s Product Disclosure Statement (PDS) and Target Market Determination (TMD) are available at www.genlife.com.au and should be considered in deciding whether to acquire, hold or dispose of the product. Superannuation products’ PDSs, offer documents and TMDs are available from the websites of their product issuers. Professional financial advice is recommended. Past performance is not a reliable indicator of future performance.  Generation Life, GDS and Evidentia do not make any guarantee or representation as to any particular level of investment returns. Generation Life does not accept any responsibility or liability for superannuation general financial product advice provided by GDS. Generation Life’s investment bonds can provide certainty as they are governed by legislation that has changed infrequently and can be appropriately structured to bypass an estate and be protected in case of bankruptcy of the life insured. Investments carry risks.

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Mr Rodda joins Generation Life at a pivotal period of growth for the company, a market leading provider of tax-effective investments and retirement income specialist.

Felipe Araujo, CEO of Generation Life said: “It’s a privilege to welcome Brendon to Generation Life. With more than 25 years of experience in financial services, he is exceptionally well placed to take on this role. He will further strengthen our growth trajectory by enhancing our capabilities and broadening the sectors we represent, supporting financial advisers in delivering solutions aligned to Australians’ evolving wealth needs.

“Building on the heightened interest in investment bonds and our strategic alliance with BlackRock to drive innovation in Australian retirement incomes, Brendon’s arrival advances our national footprint and amplifies the targeted promotion of our strategic product solutions across wealth management, financial advice and institutional engagement. As Australia’s market leader in after-tax solutions for estate planning, and pre- and post-retirement incomes, we remain focused on delivering innovative structures that empower investors with greater flexibility, protection, and certainty beyond superannuation.

“Brendon joins Generation Life effective immediately. The executive group and our national team welcome him at this exciting time,” Mr Araujo said.

Mr Rodda’s arrival is backed by career successes in sales, strategy and business leadership at leading wealth management and financial service organisations. With an early background in financial planning, Mr Rodda has deployed a deep understanding and appreciation for the role of quality advice matched with market leading product solutions.

His executive career spans several well-known finance brands including Challenger, NabInvest (MLC), Macquarie Investment Management, PIMCO Australia and Allianz Retire Plus.

“I have long admired the Generation Life evolution and its approach to delivering flexible, innovative investment strategies and solutions for financial advisers and their clients,” Mr Rodda said.

“My work has equally focused on supporting the quickly maturing needs of Australian retirees and those seeking greater certainty in their post-accumulation phase of life. I see enormous opportunity to deepen our strategic relationships across Australia’s wealth and advice channels, ensuring Generation Life continues to be the provider of choice for investment bonds and lifetime annuities.

“I am pleased to join the executive group at Generation Life and look forward to accelerating our growth in core markets and across the spectrum of strategic sales and client engagement.”

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Patrick Clarke

New independent research recently released by award-winning SMSF actuarial certificate provider, Accurium, has confirmed that LifeIncome – its investment-linked lifetime income product – can materially enhance retirement outcomes and sustainable regular income for Australian retirees.

The report, ‘Confidence for Life – A retirement advice framework’ analysed 672 retirement strategies and 96 household cohorts across 2,000 simulations.  It found that retirees with moderate to high asset values and conservative to growth risk profiles experienced improvement when LifeIncome was included in their portfolios. For many cohorts, confidence in retirement strategy scores improved by at least +10%, with the strongest uplift reaching +41%.*

These findings are significant given a central issue in retirement planning is longevity risk, or the fear of outliving savings. The research demonstrates how LifeIncome can help by providing income guaranteed for life that can grow with investment performance, while also improving access to the Age Pension today. Modelling showed some households could see their first-year Age Pension rise by up to 68% when LifeIncome was part of their portfolio.*

Patrick Clarke, General Manager of Retirement Solutions at Generation Life, said: “This research underscores how LifeIncome can give retirees both confidence and choice. By combining income guaranteed for life with access to growth assets, LifeIncome can help advisers deliver better outcomes for their clients. Retirees can enjoy today, while knowing their future needs can be covered – it’s about replacing fear with confidence. We see this as a major step forward in helping Australians retire with greater certainty and freedom.

Melanie Dunn, Principal at Accurium, said: “Our independent research gives advisers clear insights into how lifetime income products like LifeIncome can fit within a retirement strategy. By modelling real-life scenarios, we aimed to provide advisers with a practical framework to help clients balance flexibility, sustainability, and confidence in retirement. Our goal is to ensure advisers are better equipped to guide their clients through one of the most complex financial challenges they will ever face – turning savings into a reliable income for life.”

Unlocking opportunities for advisers

The findings come as government policy reforms – such as the Best Practice Principles for the Retirement Income Covenant – place greater focus on high quality, sustainable retirement income strategies. So, advisers are also increasingly seeking solutions that can extend beyond traditional account-based pensions.

LifeIncome offers a way that can:

• Manage longevity risk
• Work in tandem with the social security system
• Deliver client-focused retirement outcomes

Driving the future of retirement innovation

Generation Life continues to strengthen its retirement solutions platform. In May 2025, it announced a strategic alliance with BlackRock to co-develop Holistic Retirement Solutions, further reinforcing its commitment to innovation and market-leading products for advisers and their clients.

As Australians have been living longer, the demand for retirement solutions that balance certainty will only continue to grow. Investment-linked lifetime income products like LifeIncome are uniquely positioned to address this need, offering advisers a powerful tool that can improve client outcomes and strengthen their value proposition in a competitive advice landscape.

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* Models are based on assumptions and estimates not to be relied on to make final decisions. There are risks associated with particular asset classes of a product and including a product in a particular investment plan. Read the report including its future looking information (based on past performances – not a reliable indication of future performance) to assess whether the information is reliable and relevant for you. The product’s Product Disclosure Statement (PDS) and Target Market Determination (TMD) are available at www.genlife.com.au and should be considered in deciding whether to acquire, hold or dispose of the product. Superannuation products’ PDSs, offer documents and TMDs are available via the websites of their product issuers. Professional financial advice is recommended. Generation Life, GDS and Evidentia exclude, to the maximum extent permitted by law, any liability (including negligence) that might arise from this information or any reliance on it. Generation Life, GDS and Evidentia do not make any guarantee or representation as to any particular level of investment returns. Generation Life does not accept any responsibility or liability for superannuation general financial product advice provided by GDS. 

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