Legal & General is to launch a new fixed-term annuity to help savers limit the income tax they pay when accessing their pensions after April.
The move represents a dramatic shift in stance for the provider. In 2012, L&G Assurance chief executive John Pollock – who recently retired – told Money Marketing he had warned the regulator of his “deep concerns” about the potential for misselling of fixed-term annuities.
L&G individual retirement managing director Bernie Hickman says: “We are exploring extending our lifetime annuity to include fixed-term annuities. We think that’s going to be an increasingly popular option for customers not wanting to lock into low interests rate.
“Alternatively it could be a good way for customers who are risk-averse to withdraw their money in an income tax efficient way. Typically, they could do that over five years with a fixed guaranteed return income.
“It’s going to be particularly relevant in the early stages of the Budget reforms where people have relatively modest DC savings.”
Retirement Intelligence director Billy Burrows says: “A lot of water has passed under the bridge since L&G issued a withering assessment of fixed-term annuity products in 2012.
“There is a concern that many people will shun lifetime annuities and end up taking too much risk in drawdown, so fixed term may be a good home for many of these people.”