The annuity would provide protection against longevity and inflation risk, Challenger Life Company chief executive Richard Howes said.
It would also guarantee investors "attractive rates" of return, Howes said.
The product would also allow investors to redeem 70 per cent of their capital within the first 15 years, therefore addressing key criticisms of annuities centred on their limited flexibility and lack of access to capital, he said.
"While we haven't issued any lifetime annuities since 2007, we're encouraged by the Henry review's recommendations in support of both lifetime and deferred lifetime annuities, and would like to make available to retirees an innovative product with liquidity and attractive pricing," a Challenger spokesperson said.
Challenger's new lifetime annuity product is set to be launched before the end of September.
The product will be linked to Australian inflation via the consumer price index.
Challenger Life Company's assets under management stood at $6.6 billion at the end of March.
