Challenger Ltd shares storm higher on Federal Budget plans

One of the best performers on the local market on Wednesday has been the Challenger Ltd (ASX: CGF) share price.

In morning trade the annuities company’s shares are up 4.5% to $12.43.

Why are Challenger’s shares on the rise this morning?

Investors have been fighting to get hold of Challenger’s shares this morning after the Federal Budget announcement last night was judged to be a positive for the company’s prospects.

This was backed up by an announcement out of the company this morning supporting the government’s decision to transform the retirement phase of superannuation.

What is being transformed?

The Federal Budget included Retirement Income Framework reforms that aim to improve the standard of living for Australia’s retirees.

To achieve this the government will introduce a retirement income covenant requiring trustees of superannuation funds to offer Comprehensive Income Products for Retirement (CIPRs) that provide individuals with income for life, no matter how long they live.

In addition to this, there will be new means test rules for lifetime retirement income stream products that are designed to provide clarity and certainty about the future treatment of these products.

These means test rules will enable the development of new retirement income products, including deferred lifetime annuities, to give retirees more choice and flexibility.

Challenger’s CEO, Brian Benari, believes the move signals a major step forward for the retirement phase of superannuation.

He stated that: “These announcements demonstrate the Government’s commitment to developing a superannuation system that better meets the needs of Australia’s retirees, by ensuring pooled lifetime income stream products become a mainstream option in retirement.”

This certainly appears to be great news for Challenger and I can’t say I’m surprised to see its shares on the rise this morning.

Other shares that appear to be in favour with investors today following the Federal Budget are Zenitas Healthcare Ltd (ASX: ZNT) and Ltd (ASX: KGN).

As a home care provider Zenitas is expected to benefit from the government’s decision to pledge $1.6 billion over the next four years to support older Australians who want to stay at home instead of going into aged care. And Kogan could benefit from tax cuts increasing the disposable income of consumers.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia has recommended ltd and Zenitas Healthcare Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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