The company considers that as life expectancy con-tinues to improve, the investment potential offered by a with-profits annuity could help to counter the impact of inflation on pension income over longer periods of retirement.
It has produced a guide for advisers to use with clients to help explain how with-profits annuities work.
Head of annuity product development Tim Gosden says: “People do not appreciate how long they are likely to live in retirement. They may have to rely on their pension for 20 years or more.
“This is a long time to live on a fixed level of income provided by a conventional annuity, particularly given the likely impact of economic changes in that period.
“Even during a period of low investment returns, the income from a with-profits annuity would still not fall below the minimum guaranteed level set at the outset.”
IFA Paul Duckworth says: “The standard problem with any investment-linked annuity remains. If you want the starting amount of the annuity to match a level annuity, you have got to assume the level of the bonus rate or assume the investment return. If you get it wrong, the annuity goes down.
“Longevity is the buzzword of the moment but I cannot see with-profits annuities filling the need.”