1. August 2015 Retirement is different Considerations and opportunities

2. 2 This information is current as at August 2015 unless otherwise specified and is provided by Challenger Life Company Limited ABN 44 072 486 938, AFSL 234670 (Challenger), the issuer of the Challenger Annuities (Annuity). It is intended to be general information only and not financial product advice and has been prepared without taking into account any person’s objectives, financial situation or needs. Investors should, before making any investment decision, consider its appropriateness having regard to these matters and the information in the product disclosure statement (PDS) for the relevant Annuity before deciding whether to acquire or continue to hold an Annuity. A copy of the PDS is available at www.challenger.com.au or by contacting our Investor Services Team on 13 35 66. Where examples, hypotheticals or case studies are used, they are used for illustrative purposes only. They are not to be relied on and do not reflect any person’s particular objectives, financial situation or needs. This information may also include statements of opinion, forward looking statements, forecasts or predictions based on current expectations about future events and results. Any such statements are subject to change and actual results may be materially different from those shown. This is because outcomes reflect the assumptions made and may be affected by known or unknown risks and uncertainties that are not able to be presently identified. The taxation, Centrelink and Department of Veterans’ Affairs (DVA) information and illustrations are based on current law at the time of writing which may change at a future date. Challenger is not licensed or authorised to provide tax, social security or DVA advice. We strongly recommend that professional taxation, social security and/or DVA advice for individual circumstances be sought. Past performance is not a reliable indicator of future performance. In preparing this information, Challenger has 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 presented is not intended to be a complete statement or summary of the industries, markets, securities or developments referred to in the presentation. Neither Challenger nor their related entities, nor any of their directors, employees or agents accept any liability for any loss or damage arising out of the use of all or part or, or any omission, inadequacy or inaccuracy in, the information presented. Where a person acquires or holds an Annuity, Challenger and its related parties will receive the fees and/or other benefits disclosed in the relevant PDS. Neither Challenger, its related entities nor their employees receive any specific remuneration for any advice provided. Financial advisers, however, may receive fees or commission if they provide advice to you or arrange for you to invest in a Challenger Annuity. Some or all Challenger Group companies and their directors may benefit from fees, commissions and other benefits received by another Group company.

3. 3  Retirement is different  Key retirement considerations - Longevity – the ‘how long’ of retirement - Sequencing – the down and ups of markets matter - Inflation – the ability to maintain spending power  Age Pension changes from 1 January 2017  Reviews – integral to success Agenda

4. 4 Retirement is different Retirement brings a host of challenges and uncertainties You will no longer be receiving a regular income from employment You may rely on a combination of superannuation, other investments and the Government Age Pension Lifestyle changes A time of change

5. 5 Retirement is different What does your retirement look like?

6. 6 Retirement is different What does your retirement look like? Sydney Morning Herald, Sydney 4 August 2015.

7. 7 Source: National Seniors Australia – Retirees’ Needs and Their (In)Tolerance for Risk – March 2013. What is important to retirees National Seniors Australia Survey 1. Health 3. Peace of mind 4. Inflation 5. Volatility 6. Accessibility 2. Longevity Medium priorityLow priority High priority

8. 8 Retirement is different Managing some of the key risks in retirement is an important part of achieving a successful retirement Inflation Sequencing Longevity Success through careful consideration

9. 9 Retirement is different Longevity

10. 10 Retirement is different How long do you expect retirement will be? 1.Australian Life Tables produced by the Australian Government Actuary.

11. 11 Retirement is different Source: Challenger estimate from Australian Life Tables 2010-12 with 25 year mortality improvement factors from AGA. Longevity a key retiree consideration

12. 12 Retirement is different Australian’s own expected life expectancy Source: National Seniors Australia, How realistic are senior Australian’s retirement plans July 2014. Age groupAverage estimation of own life expectancy Intergenerational Report Underestimation 50 to 5481.488.5-7.1 55 to 5982.888.2-5.4 60 to 6483.588-4.5 65 to 698488-4 70 to 7485.488.3-2.9 75 to 7986.988.9-2

13. 13 Retirement is different Investments

14. 14 Retirement is different The addition of returns TRUE or FALSE? Initial investment of $100,000… -5% return in year 1 and then +5% in year 2 Investment after 2 years is $100,000

15. 15 Retirement is different The addition of returns TRUE or FALSE? Initial investment of $100,000… -5% return in year 1 and then +5% in year 2 Investment after 2 years is $100,000 FALSE $100,000 after -5% return = $95,000 $95,000 after +5% return = $99,750 In fact, on $95,000 a 5.263% was required to be equal!

16. 16 Retirement is different Order of returns Initial investment of $100,000…no withdrawals -5% return in year 1 and then +5% in year 2 equals $99,750 at the end of year 2 Would the answer be the same if the returns were reversed? YESor No

17. 17 Retirement is different Order of returns Initial investment of $100,000…no withdrawals -5% return in year 1 and then +5% in year 2 equals $99,750 at the end of year 2 Would the answer be the same if the returns were reversed? YESor No

18. 18 Retirement is different Sequence in retirement 1.Assumes withdrawals are made regularly during the year Initial investment of $100,000…$5,000 p.a. withdrawals 1 … -5% return in year 1 and then +5% in year 2 equals $90,006 at the end of year 2 Would the answer be the same if the returns were reversed? YESor No?

19. 19 Retirement is different Sequence in retirement 1.Assumes withdrawals are made regularly during the year Initial investment of $100,000…$5,000 p.a. withdrawals 1 … -5% return in year 1 and then +5% in year 2 equals $90,006 at the end of year 2 Would the answer be the same if the returns were reversed? YESor No $100,000 after +5% return = $90,125 $105,000 after -5% return = $89,506

20. 20 Retirement is different Sequencing risk – Order does matter in retirement Source: Challenger estimates using ABS, S&P/ASX accumulation with UBS and Commonwealth bank bond indices. Assumes retiree draws ASFA comfortable standard of living $42,254 indexed to CPI each year.

21. 21 Retirement is different Inflation Assumes annual inflation of 2.5%

22. 22 Retirement is different Maintaining your purchasing power

23. 23 Retirement is different The government safety net

24. 24 Retirement is different Proportion of people 65+ receiving some element of a government pension Source: Department of Families, Housing, Community Services and Indigenous Affairs; Department of Veterans’ Affairs; Challenger estimates % people 65+ 2011 Full rate Age Pension 41% Part rate Age Pension 27% Total on Age Pension 68% DVA (65+, ex age pensioners) 8% Total on some kind of government pension 76% Proportion not receiving a government pension 24%

25. 25 Retirement is different January 2017 Centrelink changes Based on projected rates and thresholds at 1 January 2017. From 1 January 2017: Taper rate change - $3 per $1,000 from $1.50 per $1,000 Assets Test thresholds will change (detailed below) Legislated Single, homeowner $250,000 Single, non-homeowner $450,000 Couple, homeowner $375,000 Couple, non-homeowner $575,000 Couple, illness homeowner $375,000 Couple, illness non-homeowner $575,000

26. 26 Assessable assets Age Pension received at current $1.50 taper rate* Age Pension received under rebalanced Asset Test measure Reduction in pension income received $451,500$28,956 $0 $500,000$27,065$25,173$1,892 $600,000$23,165$17,373$5,792 $700,000$19,265$9,573$9,692 $800,000$15,365$1,773$13,592 $823,000$14,467$0$14,467 $900,000$11,465$0$11,465 $1,000,000$7,565$0$7,565 $1,100,000$3,665$0$3,665 $1,200,000$0 Retirement is different Measuring the impact – couple homeowners *Based on projected pension rates at 1 January 2017. Source http://www.liberal.org.au/latest-news/2015/05/07/fairer-access-more-sustainable-pension, viewed 7 August 2015. People with assessable assets below $289,500 will see an increase or no change to their Age Pension benefit

27. 27 Assessable assets Age Pension received at current $1.50 taper rate* Age Pension received under rebalanced Asset Test measure Reduction in pension income received $289,500$20,085 $0 $300,000$19,676$19,266$410 $400,000$15,776$11,466$4,310 $500,000$11,876$3,666$8,210 $547,000$10,042$0$10,042 $600,000$7,976$0$7,976 $700,000$4,076$0$4,076 $800,000$0 Retirement is different Measuring the impact – single homeowners *Based on projected pension rates at 1 January 2017. Source http://www.liberal.org.au/latest-news/2015/05/07/fairer-access-more-sustainable-pension, viewed 7 August 2015. For those with assessable assets below $289,500 will see an increase or no change to their age pension benefit

28. 28 Retirement is different Understanding the change Changes take effect from 1 January 2017 Commonwealth Seniors Health Card (CSHC) available to retirees who loose the Age Pension Your adviser can - Discuss the impact of the changes - Review your current investments - Identify strategies to help improve your age pension entitlement

29. Reviews Keeping on track to succeed

30. 30 Retirement is different Keep things on track Adapted from GDC Research and Practical Perspectives, Serving retirement income clients: A best practices guide for advisors Personal changes Financial changes Future cash flow needs Retirement Vision ‘review and update’ Review investments for changes

31. 31 Retirement is different Financial advice covers many areas

32. Any questions?