Annuities are a valid option for insuring against longevity, but superannuation investors and pensioners are best off delaying the purchase of such a product until the last moment, according to Russell Investments.

"The guiding principal is that an annuity is not necessarily a bad thing, you just want to delay it and buy it right at the end, because otherwise you are buying an option that you may not necessarily need," Russell Investments chief investment officer Peter Gunning said at the Fund Executives Association annual conference last week.

"When looking at the internal rate of return, there is a benefit to holding off on buying an annuity."

Rafe Consulting principal Barry Rafe said funding retirement was becoming increasingly more difficult for many pensioners, as the average life expectancy continued to increase - more so than people expected.

"Homosapiens have been on the earth for about 50,000 to 100,000 years. [But] over 50 per cent of every human who has ever lived past the age of 65 is still alive now," Rafe said.

"We've got some amazing changes happening, but the problem is that people don't really see this.

"When we see life expectancy figures, we see the ABS (Australian Bureau of Statistics) figures, and the last one showed that men had a life expectancy of 79 and women have life expectancy of 84.

"The thing is that life expectancy is about people that have died in that year, so they are primarily weighted by people who were born 70 years ago. They don't apply to us.

"If you look at the statistics in the last 25 years and project them forwards, then if you are 65 now, then your life expectancy for a man is 86 and for a women is 89."

He said providers of annuities were fully aware of the statistics and they were reflected in the price of these products.

"On the face of it, lifetime annuities look very expensive, because [providers] know about the improvements in mortality and the regulator requires them to hold a lot of capital," he said.

"The other thing with a lifetime annuity is that you are taking a bet that the company you buy it from will outlive you. In this day and age, people worry about making such a bet."

But Challenger has been successful in selling annuities in the retail market, reporting $1.45 billion in sales in the 2011 financial year.

The company expects to see 30 per cent growth in retail annuity sales in 2012, aiming for $1.9 billion in revenues.

Super funds are now considering offering such products to their members as well.

"We are trying to amplify the post-retirement products, so we will be offering an annuity product," QSuper chief investment officer Brad Holzberger said.

"It has its challenges, but at least it gives some capacity to change [to] capital without interest rate risk should [members] wish to take it out."