Page 9 - Understanding Aged Care

UNDERSTANDING AGED CARE

What is an annuity? Purchase price

An annuity is a series of regular income The purchase price is the initial amount invested.
payments received over a specified period of Once commenced, you cannot add additional
time, purchased with a lump sum investment. money, but you can purchase another annuity.

How does it work? Term

An annuity is purchased from a life insurance The term of the annuity determines how
company using ordinary (non-superannuation) or long you will receive your income payments.
superannuation money. The amount and duration A lifetime annuity means you will receive
of income payments will depend on a variety of payments for the remainder of your life. A fixed
options which can be selected at commencement: term means you will receive payments for the
specified number of years.
Purchase price
• Lump sum Your payments may continue after your death if
• Super vs non-super you have nominated a reversionary beneficiary.
• Withdrawal limitations Income payments will ‘revert’ to this beneficiary
and continue until the end of the nominated term.
Term
• Lifetime Withdrawals
• Set term
• Reversionary beneficiaries Often you will not be able to withdraw your
money after the annuity has commenced except
Residual during any cooling off periods. If withdrawals are
• Range from 0-100 % allowed or the annuity is stopped early, you may
• Paid at the end of the term receive back less money than you invested.

Other factors
• Ownership
• Return offered on investment

Income payment
• Frequency of payments
• Indexation of payments

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