How can annuities and lifetime pensions protect against outliving your savings?
This page gives general information. It is not financial product advice and does not take your circumstances into account.
Short answer
An annuity is a financial product bought from a life insurance company or friendly society. You pay a lump sum in return for regular income, for a set number of years or for the rest of your life. A lifetime pension is a similar product bought from a super fund. Both are types of lifetime income stream, which pay income for as long as you live, but you give up access to the lump sum.
Outliving your savings
Nobody knows how long they will live. A lifetime income stream pays regular income for as long as you live, which can give peace of mind that you won’t outlive your savings. Bought from a super fund, it may be called a lifetime pension. Bought from a life insurance company or friendly society, it is called a lifetime annuity (Moneysmart 2026b).
The Australian Longevity Calculator estimates how long Australians are expected to live, based on characteristics such as age, sex, income and location.
How annuities work
An annuity can be bought with super or other savings. If you use super, you generally need to meet the rules for accessing it first, such as reaching preservation age and retiring. When you buy an annuity, you choose whether payments last for a fixed number of years or for the rest of your life (Moneysmart 2026a).
What affects the income. With a conventional annuity, the payment is set when you buy it. It depends on how much you use to buy the annuity, how long it is invested for and how often you choose to be paid. Payments can increase each year by a fixed percentage or be indexed to inflation. With an investment-linked annuity, the length of payments is guaranteed but the amount rises or falls with the chosen investment option (Moneysmart 2026a).
When you die. Payments usually stop, unless you nominated a reversionary beneficiary or chose a guaranteed period when you bought the annuity. A reversionary beneficiary, usually a partner or dependant, receives payments for the rest of their life, usually at a reduced level such as 60%. With a guaranteed period, your beneficiary receives the payments if you die within that period (Moneysmart 2026a).
Trade-offs
Moneysmart lists these among the potential advantages and disadvantages (Moneysmart 2026a).
| Potential advantages | Potential disadvantages |
|---|---|
| Income for a set period or for life. A lifetime annuity keeps paying however long you live. | The lump sum is no longer yours to invest or spend. |
| With a conventional annuity, income is guaranteed and does not depend on markets. | Income may be less than you could earn by investing the money yourself, especially when interest rates are low. |
| Payments that rise over time can help keep pace with living costs. | Terms are fixed after the cooling-off period, and the money usually cannot be withdrawn. |
| A lifetime annuity can increase Age Pension entitlements, because of how the income and assets tests treat it. | Payments that do not rise over time lose value to inflation. |
Who regulates
APRA supervises life insurers (APRA 2026). Since 1 July 2022, the trustees of super funds have been required to have a retirement income strategy for their members, under the Superannuation Industry (Supervision) Act 1993 (ASIC 2026).
Where to get help
An annuity forms part of the income and assets tests for the Age Pension. A Services Australia Financial Information Service officer can help work out how an annuity would affect Age Pension entitlements. A licensed financial adviser or your super fund can help with personal decisions (Moneysmart 2026a). Moneysmart’s guides to annuities and lifetime income streams explain the options in more detail.
Last reviewed 6 November 2026.