Life Annuities Australia: 2025 Guide to Secure Retirement Income

For Australians eyeing a confident retirement, the looming question is: will my super and savings last? With Australians living longer than ever and market volatility a constant threat, life annuities are gaining attention as a reliable solution for income certainty in later life.

What Is a Life Annuity?

A life annuity is a financial product that pays you a guaranteed income for life in exchange for a lump-sum payment upfront. Offered by insurers and superannuation funds, annuities are designed to remove the worry of outliving your money. The insurer takes on longevity and market risk—no matter how long you live or what happens on the ASX, your payments continue.

• Lifetime income: Payments continue until your death (and may continue to a spouse, depending on the product).

• Customisable options: Choose inflation-linked increases, minimum guaranteed payment periods, or residual capital return.

• Tax and Centrelink advantages: As of 2025, new rules can make annuities more attractive for Age Pension eligibility.

2025 Policy Updates: What’s Changed?

Australia’s retirement income policy has seen significant tweaks in 2025 aimed at encouraging more retirees to use income streams like annuities instead of drawing down lump sums. Here’s what’s new:

• Improved Centrelink means test treatment: The government now exempts a higher portion of life annuity purchase prices from the Age Pension assets test, making it easier to qualify for payments.

• Greater product diversity: Insurers are rolling out more flexible annuities, including deferred and hybrid options that blend lump-sum access with regular income.

• Stronger consumer protections: ASIC has tightened disclosure rules, making fee structures and withdrawal restrictions clearer for retirees.

For instance, a 65-year-old in 2025 investing $250,000 from their super into a lifetime annuity may see only $125,000 (or less, depending on product features) counted under the assets test—potentially boosting their Age Pension by thousands per year.

Should You Consider a Life Annuity?

Life annuities aren’t for everyone, but they can be transformative in the right situation. Here’s who might benefit most:

• Risk-averse retirees: If you want to lock in a regular, predictable income that lasts as long as you do, annuities are hard to beat.

• Those without defined benefit pensions: Most Australians don’t have a guaranteed income stream outside the Age Pension—annuities fill this gap.

• People concerned about longevity risk: If you have a family history of longevity or worry about running out of super, an annuity can provide peace of mind.

Real-world example: In 2025, Julia, a 70-year-old retiree from Brisbane, allocated half her super to a lifetime annuity after watching friends struggle with market downturns. Her regular, inflation-linked payments have insulated her from share market shocks and allowed her to budget for aged care costs without anxiety.

Pros and Cons: The Full Picture

Pros:

  - Lifelong, stable income stream

  - Protection against market and longevity risk

  - Potential Age Pension boost under 2025 rules

  - Optional features for inflation, spouse protection, or capital return

Cons:

  - Lower returns compared to risky assets in strong markets

  - Capital is usually inaccessible after purchase (with some exceptions)

  - Complex product features and fee structures—careful comparison is essential

How to Get Started with a Life Annuity in 2025

Australians considering an annuity should:

• Review their retirement income goals and appetite for risk.

• Compare product offerings from reputable providers, looking closely at payment rates, indexation, and withdrawal conditions.

• Check how the annuity will affect Age Pension eligibility under the new 2025 rules.

• Seek professional advice to ensure the annuity fits within a broader retirement income strategy.