Type: Fixed term annuity
Minimum investment: Normally £10,000
Minimum age: 50 (rising to 55 in 2010)
Term: Normally at least 5 years, to a maximum age of 75
Minimum – maximum income: Nil to GAD maximum
Income frequency: Monthly, quarterly, half-yearly or annually as required.
Income can be paid in advance, or in arrears with or without proportion
Charges: Implicit in rate offered
Commission: Initial 1.5%
Tel: 08450 588 500
Living Time’s plan allows clients to tailor the plan to suit their individual income needs as income can be set at outset between £nil and the Government Actuary’s Department maximum.
It also offers a number of flexible death benefits, including value protection, which returns the initial investment less gross income paid for the benefit of a spouse/civil partner and/or dependents.
Chartwell Private Client annuity manager Sean McCabe says the plan offers a ‘keep your options open’ alternative to a lifetime annuity and a ‘no investment performance risk’ alternative to conventional drawdown.
He says it is ideal for clients who are looking for a fixed income up to age 75 with an underlying guarantee at the end of the chosen term that is known from outset and unaffected by investment performance. On default income, the guaranteed maturity amount is targeted to maintain the level of income assuming that annuity rates remain the same as they are today.
As the plan can be set to terms of five years or more, McCabe says it gives clients the chance to review their income and benefit needs on a regular basis and effectively press the reset button. He finds this particularly useful if a client’s circumstances have changed over that period, perhaps because of ill health, the death of a partner/spouse or a recent inheritance. It also gives adviser the opportunity to generate a recurring income stream from clients, “enabling them to advise clients through retirement, not just at retirement”.
McCabe likes the fact that the charges are reflected in the income rate and maturity amount, with no additional annual management charge, and that remuneration is more favourable than on standard lifetime annuities.
McCabe’s concerns centre on the annuity rate risk. By deferring permanent annuitisation, the client may end up worse off at the end of the plan term if annuity rates have dropped. If a client is looking for an absolute guarantee of income for the rest of their lives, then he says the Living Time plan is not suitable.
McCabe says the plan provides advisers with an alternative to the more traditional retirement income options: “By combining competitive fixed term income with absolute guarantees, it provides a powerful option.”
He believes it is a product that can look to bridge the gap between the “inflexibility of lifetime annuities and the roller coaster of full-blown drawdown.”
Suitability to market: Good
Investment strategy: Good
Product options: Good
Adviser remuneration: Good