Britannic Retirement Solutions has entered the purchased life annuity market.
Purchased life annuities are not pension annuities, so they can be taken out by anyone who needs an income for life. However, they are usually of interest to people who are approaching retirement or who have already retired. They may, for example, be used to fund long-term care. The Britannic annuity is available to people aged 50 and over who have capital of at least £10,000 to invest.
One difference between purchased life annuities and pension annuities is how they are taxed. All income from a pension annuity is taxed because it is treated as earned income. However, part of the income from a purchased life annuity is treated as a capital return, which is not taxable.
Figures from the Association of British Insurers show that the purchased life annuity market has been in decline. In 1997, £373m went into purchased life annuities, which had fallen to £242m in 2000. However, in 2001, the market picked up slightly to £245m. Britannic see this as a trend, reflecting a move to annuity income because lower stockmarket returns has made it difficult to secure income.
David Marlow, head of marketing at specialist annuity advisers The Annuity Bureau, thinks the product could be a good product for older age-groups. He points out that this product's Retail Price Index option, which increases income in line with inflation, gives it the edge over competitors such as GE Life and the Pension Annuity Friendly Society.