Challenger Guaranteed Pension Fund

Transcription

1 Challenger Guaranteed Pension Fund A disciplined way to manage your retirement spending needs

2 Challenger Guaranteed Pension Fund The Challenger Guaranteed Pension Fund is a unique managed fund investing in annuities. It provides a known monthly payment over a set term, regardless of interest rate and market movements during that term. The Fund can give you peace of mind that your retirement spending needs will be looked after. If you have other savings invested in growth assets, it supports a strategy aimed at quarantining those assets from spending needs to allow them time to grow. Key features The : offers set, regular payments in the form of monthly distributions, regardless of market movements returns your capital over the term of the investment with each monthly distribution gives you a choice of maturity date, meaning you can elect how long you want your investment to last offers different classes, with distributions which may, or may not, be indexed in line with a fixed percentage can help you lock in the cash flow you need to meet living expenses while preserving other capital may prevent the need to sell assets that have fallen in value during the investment term to fund income needs invests in annuities provided by Challenger Life, which is supervised by the Australian Prudential Regulation Authority (APRA) is only available via investment platforms. How the Fund works When you invest in the Fund, you purchase units in a particular class of the Fund. Each class has its own commencement date, distribution, and maturity date. Units can only be purchased during the application open period. Your units will be issued at the application unit price as at your investment date. Each class will offer a monthly distribution per unit held which provides the comfort of receiving a fixed and regular payment throughout your investment term. If you invest in an indexed class, the distribution will be increased in line with a fixed percentage as at the indexation date. The actual dollar amount you will receive each month is determined by the number of units you hold as at the last day of each month multiplied by the distribution amount. If you invest part way through a month, you will still receive the full distribution for that month. Your regular monthly distribution will be made up of both capital and income. You do not receive any amount back other than your final monthly payment amount at the maturity date. The Fund is designed for you to hold your investment for your full investment term, until the class maturity date. It is recommended that investors remain fully invested in the Fund until the maturity date.

3 The following scenarios demonstrate how an investment in the Fund works. They are indicative only and use rates and figures selected by us to demonstrate how a class works. They are not based on any investor s particular investment objectives, financial situations or needs and it is recommended you obtain independent advice before deciding to invest. Scenario 1 Investing on the class commencement date with no indexation Graph assumptions Investment period 1 January 2012 to 30 June 2017 Earnings rate 5.50% (i.e. no change during the investment term) Distribution $1.00 per unit (per month) Class commencement date Application open period Closed period No further applications will be accepted Class maturity date 1 January 2012 $60 30 June June 2017 $2 $50 Application unit price $40 $30 $20 $1 Distribution $10 $0 $0 30-Jun Jun Jun Jun Jun Jun-17 Application unit price (LHS) Early withdrawal unit price (LHS) Monthly distribution amount (RHS) This diagram is illustrative only and not to scale. It is based on the assumptions set out in this scenario. Figures used in the graph and assumptions may have been rounded. The early withdrawal unit price assumes a maximum discount of 2% p.a. The application unit price may include accrued income. Assuming you hold your investment until the class maturity date, and based on the assumptions above, to achieve a monthly distribution of $1,000 at an application unit price of $ per unit: you need to purchase 1,000 units you would need to invest $56,846 total payments would equal $66,000 over the life of the investment.

4 Challenger Guaranteed Pension Fund Case study 1 Valerie is 65 years old and has just retired. She has an account-based pension with a total balance of $400,000. Valerie is prepared to invest in growth assets over the long term, but is also looking for certainty of income to meet her requirements of $1,000 per month (or $12,000 per year), in addition to income from other sources. Valerie speaks to her financial adviser, who recommends the following asset allocation for her account-based pension as at 1 January 2012, including an allocation of $56,846 to the maturing on 30 June 2017 (CGPF 30 June 2017). Valerie s account-based pension asset allocation Cash flows: Term deposits $60,000 15% Cash $11, % Fixed income $72,000 18% CGPF 30 June 2017 $56, % Growth assets: Shares/ property $200,000 50% Monthly CGPF distribution Total CGPF payments each year Other income* Total payments Year 1^ $1,000 $6,000 $8,087 $14,087 Year 2 $1,000 $12,000 $16,174 $28,174 Year 3 $1,000 $12,000 $16,174 $28,174 Year 4 $1,000 $12,000 $16,174 $28,174 Year 5 $1,000 $12,000 $16,174 $28,174 Year 6 $1,000 $12,000 $16,174 $28,174 $66,000 $88,957 $154,957 * Assumes an annual yield of 4.4% (pre-franking) for growth assets, 4.25% for cash, 5% for fixed income, and 5.5% for term deposits. This table is illustrative only. It is based on the assumptions set out in this case study. Figures used in the table and assumptions may have been rounded. ^ The Year 1 payments are for six months only. Result The investment of $56,846 purchases approximately 1,000 units in the, providing regular payments of $1,000 per month until 30 June Total payments over the life of Valerie s investment equal $66,000 ($1,000 per month x 66 months). Valerie s account-based pension has a small cash/term deposit amount available for any emergencies that arise. Valerie s growth assets will remain invested and it is less likely that assets will need to be sold before 30 June 2017 to meet spending needs. Other considerations The portfolio must be reviewed regularly, with any rebalancing required to prepare further Challenger Guaranteed Pension Fund investment in To renew the cash flow in 2017, Valerie may at that time choose to use her fixed income assets and pooled returns from dividends and franking credits (and the sale of growth assets, if necessary). As Valerie is over 60 years of age and has retired, the income from her account-based pension is tax free.

5 Scenario 2 Investing on the class commencement date with indexation fixed Graph assumptions Investment period 1 January 2012 to 30 June 2021 Earnings rate Indexation Distribution 5.50% (i.e. no change during the investment term) 3.00% fixed as at the indexation date. (In this scenario, indexation is at a fixed rate and the indexation date is 1 July each year) Initially $1.00 per unit per month increasing by 3.00% as at the indexation date each year Class commencement date Application open period Closed period No further applications will be accepted Class maturity date 1 January 2012 $ June June 2021 $2 $100 Application unit price $80 $60 $40 $1 Distribution $20 $0 $0 30-Jun Jun Jun Jun Jun Jun Jun Jun Jun Jun-21 Application unit price (LHS) Early withdrawal unit price (LHS) Monthly distribution amount (RHS) The diagram above is illustrative only and not to scale. This diagram is based on the assumptions set out in this scenario. Figures used in the graph and assumptions may have been rounded. The early withdrawal unit price assumes a maximum discount of 2% p.a. The application unit price may include accrued income. In this diagram, the indexation is at a fixed rate as set out in the assumptions. The application unit price may include accrued income. The above graph does not apply to CPI indexation. Assuming you hold your investment until the class maturity date, and based on the assumptions above, to achieve a monthly distribution of $1,000 (indexed) at an application unit price of $ per unit: you need to purchase 1,000 units you would need to invest $101,064 total payments would equal $131,567 over the life of the investment.

6 Challenger Guaranteed Pension Fund Case study 2 Tim and Martha, both 65, have a self-managed superannuation fund (SMSF) in pension phase. The SMSF has assets of $800,000. Tim and Martha are looking for a disciplined way to manage the SMSF s assets using an investment platform, to ensure an income of $2,000 per month. They also want some protection against future increases in living expenses. Their financial adviser recommends the following asset allocation for the SMSF as at 1 January 2012, including an allocation of $202,127 to the maturing on 30 June 2021 (CGPF (I) 30 June 2021). Tim and Martha s SMSF asset allocation Term deposits $80,000 10% Cash $37, % Fixed income $80,000 10% CGPF (I) 30 June 2021 $202, % Growth assets: Shares/ property $400,000 50% Cash flows: Monthly CGPF (I) distribution Total CGPF payments each year Other income* Total payments Year 1^ $2,000 $12,000 $13,805 $25,805 Year 2 $2,060 $24,720 $27,610 $52,330 Year 3 $2,122 $25,462 $27,610 $53,072 Year 4 $2,185 $26,225 $27,610 $53,835 Year 5 $2,251 $27,012 $27,610 $54,622 Year 6 $2,319 $27,823 $27,610 $55,433 Year 7 $2,388 $28,657 $27,610 $56,267 Year 8 $2,460 $29,517 $27,610 $57,127 Year 9 $2,534 $30,402 $27,610 $58,012 Year 10 $2,610 $31,315 $27,610 $58,925 $22,928 $263,133 $262,295 $525,428 * Assumes an annual yield of 4.4% (pre-franking) for growth assets, 4.25% for cash, 5% for fixed income, and 5.5% for term deposits. This table is illustrative only. It is based on the assumptions set out in this case study. Figures used in the table and assumptions may have been rounded. ^ The Year 1 payments are for six months only. Result The investment of $202,127 purchases approximately 2,000 units in the, providing $2,000 per month (indexed) as regular monthly distributions until the class maturity date. Total payments over the life of Tim and Martha s investment equal $263,133. Tim and Martha s SMSF has an amount in cash and term deposits available for any emergencies that arise. Tim and Martha s growth assets will remain invested and it is less likely that assets will need to be sold before 30 June 2021 to meet spending needs. Other considerations The portfolio must be reviewed regularly, with any rebalancing required to prepare further Challenger Guaranteed Pension Fund investment in To renew the cash flow in 2021, Tim and Martha may at that time choose to use their fixed income assets and pooled returns from dividends and franking credits (and the sale of growth assets, if necessary). As Tim and Martha are over 60 years of age, the income from their pension is tax free.

7 What are annuities? The invests in annuities. An annuity is a simple, secure financial product that guarantees a series of payments in return for an upfront investment. The rate of return is fixed at the outset, regardless of share market movements or interest rate fluctuations. Annuities can only be issued by life insurance companies. In Australia they are strictly regulated by APRA. The Fund invests in annuities with zero residual capital value, which return part of the capital invested with each monthly payment to the Fund during the term of the annuity. Risks As with all investments, there are risks associated with investing in the. These risks are set out in the product disclosure statement for the Fund and we recommend you also go through these with your financial adviser before making any investment decision. The Challenger Guaranteed Pension Fund If you re looking to invest in a fund that provides: 4 A disciplined way for account-based pensions to provide regular payments 4 Certainty of payments for a set period 4 A way to lock in cash flow from your account based pension, giving your growth assets time to grow 4 Peace of mind that payments will not be impacted by interest rate changes or market volatility 4 An investment in a fund that invests in annuities issued by an APRA-regulated life company then you should consider whether an investment in the may be suitable for you. About Challenger Life The invests in annuities issued by Challenger Life. Challenger Life is the leading annuity provider in Australia, managing over $8 billion of assets to secure the benefits of around 60,000 annuity investors as at 30 September For years, Challenger Life has provided retirement incomes to people who want certainty of returns and a fixed cash flow throughout their retirement. Challenger Life was named the latest Annuity Provider of the Year by both AFA (Association of Financial Advisers) and Plan for Life Actuaries and Researchers. For further information about these awards, please refer to the AFA website PLAN FOR LIFE GOLD ANNUITY PROVIDER OF THE YEAR AWARD 2003, 2005, 2006 Annuity Provider of the Year Award 2008 WINNER Annuity Provider of the Year Award 2009 WINNER To find out more about the Challenger Guaranteed Pension Fund, talk to your financial adviser, visit our website or call the Challenger Investor Services team on Annuity Provider of the Year Award 2010 WINNER

8 Adviser contact details The information contained in this publication is current as at 13 January 2012 and is provided by Challenger Retirement and Investment Services Limited ABN AFSL (Challenger). It is intended to be general information only rather than advice. It is provided without taking account of any person s investment objectives, financial situation or needs. Because of that, each person should, before acting on any such information, consider its appropriateness, having regard to their objectives, financial situation and needs. Interests in the ARSN (Fund) are offered by Challenger. The Fund is not a superannuation or pension product. The Fund is a registered managed investment scheme. Challenger Life Company Limited ABN AFSL (Challenger Life) is the provider of the annuities in which the Fund invests. Whilst Challenger Life s Statutory Fund No. 2 is contractually obliged under the terms of the annuities in which the Fund invests to, amongst other things, make certain guaranteed regular income and capital payments to the Fund, no company within the Challenger Group provides a guarantee, in respect of the Fund or a person s return or capital. For additional information on the guarantee please refer to the current product disclosure statement (PDS) for the Fund. Challenger, as the responsible entity of the Fund, does not provide any guarantee in respect of the Fund, the earnings rate, the distribution or the maturity unit price. An investment in the Fund is also not secured against loss and under the constitution there is no recourse against the responsible entity (including in its personal capacity) or for investors in one class against the assets of the Fund that are referable to another class. For additional information, please refer to the current PDS for the Fund. Scenarios, examples and hypotheticals are for illustrative purposes only. Certain statements in this document may be regarded as forward looking. Forward looking statements involve known and unknown risks, uncertainties and assumptions. As a result, the actual results, performance or achievement may be materially different from those expressed or implied in this document. In preparing this information, Challenger has also relied on publicly available information and sources believed to be reliable; however, the information has not been independently verified. While due care and attention has been exercised in the preparation of this information, no representation or warranty, either express or implied, is given as to the accuracy, completeness or reliability of that information. The information in this publication is not intended to be a complete statement or summary of the industries, markets, securities or developments referred to. Persons considering investing in the Fund should first obtain and consider the information in the current PDS. A copy of the PDS can be obtained from your financial planner, our Investor Services team on , or on our website Please read the PDS carefully before making an investment decision (including deciding whether to acquire or continue to hold any investment in the Fund). Where a person acquires or holds units in the Fund, Challenger and Challenger Life will receive the fees and/or other benefits disclosed in the PDS. Neither Challenger nor Challenger Life nor their employees receive any specific remuneration for any advice provided. Some or all of Challenger group companies and their directors may benefit from fees, commissions and other benefits received by another group company. Challenger Limited Level Pitt Street Sydney NSW 2000 Telephone Facsimile /CG839/1014