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Money-back guarantees wanted for annuities

Nearly half of people would like to buy an annuity that protects capital and provides a money-back guarantee, according to research from the ABI.

The ABI supports the idea of money-back guarantees – returning capital not paid out to the customer in retirement as a lump sum to their estate on death – as a more attractive option than the 10-year guarantee giving a monthly income for the rest of the term to the customer&#39s estate.

Although 31 per cent want more advice on annuity purchase, few are willing to give up income in exchange. Of those willing to pay, only 20 per cent said they would give up more than 5 per cent for advice.

One in five people say they are prepared to give up 20 per cent of their annuity income for a money-back guarantee or the option to change annuity type.

The ABI spoke to 500 current annuitants and 101 people about to make an annuity purchase.

Britannic Retirement Solutions corporate development director Robert Bullivant says: “The guarantee becomes expensive as you get older and the level of annuity you receive will fall, so we have to be careful not to run away with the idea. There will be people who cannot afford it.”

Hargreaves Lansdown pension development manager Danny Cox says: “A money-back guarantee is a fantastic concept and could work within the confines of the current consultation.”

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