Qualified Longevity Annuity Contracts (QLACs) Explained: 2025 Guide

Australians are living longer than ever, and outliving your super is a real concern. In 2025, a new tool is gaining traction in the retirement toolkit: the Qualified Longevity Annuity Contract (QLAC). While QLACs have been a staple in the US, their arrival and adaptation to the Australian superannuation landscape is making waves among retirees and financial planners alike.

What is a Qualified Longevity Annuity Contract (QLAC)?

At its core, a QLAC is a type of deferred annuity purchased within a retirement account—such as superannuation or a self-managed super fund (SMSF). The main draw? QLACs start paying a guaranteed income stream later in life, typically from age 75 or 80, helping retirees hedge against the risk of outliving their savings. In 2025, Australian regulatory bodies have signaled greater openness to QLAC-style products, aligning with longevity risk strategies and the Retirement Income Covenant.

• Tax-deferral: Super balances used to purchase a QLAC are excluded from minimum drawdown calculations until payments commence.
• Longevity insurance: The contract guarantees income no matter how long you live, protecting against market downturns and personal longevity risk.
• Customisable triggers: You decide the age at which payments begin, within government guidelines.

How QLACs Fit into Australian Retirement Planning in 2025

Australia’s superannuation system is world-renowned, but the shift from accumulation to income drawdown has created challenges. With the 2025 implementation of enhanced Retirement Income Covenant rules, super funds are required to offer strategies that balance income stability, flexibility, and legacy considerations. QLACs are emerging as a favoured solution, especially as the government considers increasing the cap on how much super can be used to purchase such products (currently under review for a $200,000 limit).

For example, consider Helen, aged 67, with $800,000 in super. She uses $150,000 to buy a QLAC set to commence at age 80. This purchase immediately lowers her required minimum pension payments, preserving more capital in her super. At 80, the QLAC pays her a fixed income for life, supplementing her Age Pension and other super withdrawals. In 2025, such strategies are being recommended by advisers to address the twin challenges of longevity and sequence risk.

• New product offerings: Major retail and industry super funds are rolling out QLAC-style annuities with flexible deferral and payment options.
• Regulatory clarity: The Australian Prudential Regulation Authority (APRA) and Treasury are providing clearer guidelines for QLACs within the super system, including death benefit rules and surrender options.
• Tax benefits: Income streams from QLACs purchased with super are typically tax-free after age 60, aligning with existing pension phase rules.

QLAC Pros, Cons, and Who Should Consider Them?

While QLACs offer compelling benefits, they’re not for everyone. Here’s a closer look at the key trade-offs for Australians considering these contracts in 2025:

• Pros:
  • Lifetime guaranteed income starting when most retirees fear running out of money
  • Reduces minimum drawdown pressure in early retirement years
  • Can be structured with death benefits for spouses or beneficiaries
• Cons:
  • Limited liquidity – money committed to a QLAC can’t be easily accessed before payments start
  • Potentially lower returns than growth assets if you die before the deferred period ends
  • Complexity—product features, fees, and options can be difficult to compare

Who should consider a QLAC? They’re best suited to retirees in good health, with enough super to cover early retirement needs and a desire for peace of mind in later life. For those concerned about estate planning, many QLACs now include partial refund or death benefit options, but these may reduce the regular payment amounts.

How to Evaluate QLACs in 2025

The QLAC market in Australia is still maturing, but by 2025, most major providers offer clear product disclosure statements and digital calculators. When comparing QLACs, focus on:

• Deferral age and income payment options
• Fees, surrender penalties, and refund terms
• Provider credit ratings and product guarantees
• Integration with your broader super and Age Pension strategies

As the Australian government continues to encourage innovative retirement income solutions, expect QLACs to become a standard consideration in financial advice conversations. With life expectancies rising and super balances growing, locking in a guaranteed income for your later years could be the security blanket your future self thanks you for.