Retirement Income Streams

Guaranteed Income Streams

Guaranteed Income Streams (or Annuities) guarantee, and pay, a fixed income over a pre-selected period of time, generally between 1 and 30 years.

The certainty provided by annuities can be a powerful tool in protecting your retirement income from market, interest rate and inflationary risk. For this reasons, annuities should be a consideration for all retirees.

The benefits of these income streams include:

  • No management fees
  • Guaranteed interest rate for the life of the fund
  • Not affected by drops in stock markets
  • Payments can be made monthly, quarterly or yearly
  • Income payments can be set to increase with inflation
  • Annuity companies must meet statutory requirements to ensure your money is secure

A portfolio built with a combination of annuities and growth assets can also help manage the risk that you will outlive your retirement savings.

Account Based (Allocated) Pensions

Account based pensions, also known as allocated pensions, offer retirees a simple and flexible way of receiving their Superannuation balance as a tax effective income stream.

You can only start an account based pension with money you hold in superannuation. The returns you make on your investments are added to your account, which pays you regular income payments. You can commence a pension once you have met a condition of release, such as reaching your preservation age. Many superannuation funds offer a pension option allowing you to simply rollover your super benefits without needing to sell down your existing investments.

Benefits of account-based pensions include:

  • A wide variety of investment options
  • Can make lump sum withdrawals
  • No maximum on how much income can be drawn

Capital Protected Products

The 2008 financial crisis demonstrated the devastating effect market volatility can have on retirees who are drawing their income from assets exposed to investment markets. It also helped increase the popularity of products that offer a way to protect capital against market volatility.

Some of the features available in capital protected products include:

  • A guarantee that original investment will be available at the end of the investment term
  • An ability to protect investment growth during the investment term
  • A wide variety of investment options
  • Lump sum withdrawals
  • No maximum on income withdrawals