How can you get an income for life?
When you invest with Lifetime, your savings are invested in a balanced fund and your income is insured for life.
The balanced fund is very similar to a KiwiSaver fund and is managed by our four investment managers:
The fund provides you with a market investment return and regular withdrawals are made to fund your fortnightly income payments.
Your investment is held and supervised by the Government-owned Public Trust and your income is insured and guaranteed by Lifetime Income, an insurance company licensed by the Reserve Bank of New Zealand.
I don't worry anymore. I know I'll always have enough.
- Jane, Kapiti
How much income will you get?
The amount of income you get depends on your age and how much you choose to invest.
Your income is called your Insured Income. You can start receiving this at any time from age 60. It's paid to you fortnightly on the same day as New Zealand Superannuation and is insured to last the rest of your life.
When you invest, you're given a Insured Income Base. This is set equal to the value of your initial investment and is the base your income is calculated from.
Your income rate is a percentage of your Insured Income Base and is based on your age when you start your Insured Income. It is quoted as a net rate i.e. after fees and tax.
For example, if you invested $100,000 at age 67, your Insured Income Base would be set to $100,000 and at age 67, your net income rate would be 5.20% per annum.
This would give you a net Insured Income of $5,200 each year, paid into your bank account at a rate of $200 every fortnight for life.
Try the Lifetime Income Calculator to see how much income you could get.
Your income can rise but cannot fall
Your income can rise with investment returns but because it's insured, it cannot fall.
Each year, Lifetime reviews your Insured Income Base and resets it to the higher of your investment account balance or its present value. This locks in annual returns and protects your income from market volatility. While your account balance will fluctuate with investment markets, your Insured Income Base will not.
Because your Insured Income is calculated from your Insured Income Base, this means your income can rise or remain the same, but it cannot fall.
What's your income made up of?
Your Insured Income is made up of investment returns and when necessary, capital drawdown.
In years where net investment returns are greater than your income payments, the difference is credited to your account and your Insured Income may rise proportionately.
In years where net returns are less than your income payments, you’ll drawdown some capital to make up the difference. Your Insured Income will remain unchanged.
Over the course of a long retirement, it's possible your regular income withdrawals may drawdown your balance entirely. However, this doesn't mean you'll run out of income. Lifetime’s longevity insurance ensures you continue to get your regular income payments for life.
This gives you certainty. You know you’ve got money coming in every fortnight to pay the bills, just like when you were working. You also don’t have to worry about stock market crashes or low interest rates affecting your income.
I knew Super wouldn’t be enough. Now I know I'll be ok, even if I live to 100
- Judy, Wellington
You're 65 and want to invest $100,000. How does it work?
At age 65, your net income rate would be 5.00% per annum of your Insured Income Base.
Your Insured Income Base would be set equal to your initial investment of $100,000 and you would receive a net Insured Income of $5,000 each year, paid fortnightly into your bank account at a rate of $192.31 every fortnight, for life.
In the first year, let's say the fund earns a net annual return of 7.00% or $7,000. After receiving your regular income payments totalling $5,000, your account balance would be $102,000 at the end of the year.
At your annual account review, your Insured Income Base is increased to $102,000 and your Insured Income rises to $5,100 a year (5.00% of your new Insured Income Base of $102,000) or $196.15 each fortnight, for life.
What if market returns are poor?
Like all managed funds and KiwiSaver funds, returns from the balanced fund may fluctuate each year. Let's look at an example where your investment returns are less than your income payments.
This time, the fund provides you with a net annual return of 3.50% or $3,500. After receiving your Insured Income payments totalling $5,000, your account balance would be $98,500 at the end of the year.
Although your account balance has been slightly depleted, your Insured Income Base cannot fall and remains at $100,000. This means you continue to receive your net income payments of $5,000 every year (5.00% of your Insured Income Base) for the rest of your life.
If over the course of a long retirement you drawdown all your savings, Lifetime’s insurance ensures you continue to receive your regular income for life.
Dave & Sharon need a secure income for life
Learn how Dave and Sharon invested to get an income that will last as long as they do.
Defer and grow your income
If you don't need income right away, you can choose to invest and defer your income for a few years. This can help you grow your savings and your future income while you're still working.