Tuesday, 15 May 2001.
Prudential Annuities – Flexible Lifetime Annuity
Type: With-profits and unit-linked annuity.
Minimum investment: £100,000.
Minimum age: 50.
Income frequency: Monthly, quarterly, half yearly or annually. Payable in advance or in arrears.
Charges: Initial 3 per cent, annual 0.8-1.225 per cent.
Commission: Initial 2 per cent, renewal 0.25 per cent.
Tel: 0845 6060630.
Peter Quinton – Managing director, The Annuity Bureau
Brandon Harford – IFA, Howell Shone IFA
Adrian Wilkins – Senior associate, Redcliffe Associates IFA
Keith Jarman – Consultant, Hughes Carne IFA
Broker Ratings (ave. marks out of 10):-
Investment options: 7.0
Company's reputation: 7.8
Past performance: 7.0
Product literature: 8.0
The Prudential flexible lifetime annuity is an unusual combination of a with-profits and unit-linked annuity.
Considering how the plan fits into the market, Wilkins says: “It is in a unique position between conventional annuities and drawdown. Higher risk than a with-profits annuity, but without the income volatility of unit-linked annuities.”
Harford feels that it is a very good idea to compliment purchased life annuities and the flexible approach one expects from a drawdown plan.
Quinton says: “At the wealthier end of the market – it fits in quite well.”
Turning to the type of client that the plan may be suitable for, Harford says: “Clients who believe in investing their pension fund with almost the ultimate flexibility.”
Quinton says: “Financially aware retirees with pension funds over £100,000 who are looking for either or both a flexible lifetime income and growth potential. Also they are prepared to take on the associated investment and mortality risks inherent with the product, but who want to leave the investment management decisions to the fund managers.”
Wilkins feels that the plan will suit virtually every drawdown client reaching age 75, as well as clients who like the idea of drawdown but are put off by the costs involved and have a fund of over £100,000. He also mentions clients who prefer death benefits to be between conventional annuities and drawdown.
Jarman lists: “Sophisticated, financially aware clients, high net worth and fee based advice seekers.” He also says: “It is a complex product, for many clients too complex.”
Moving on to the marketing opportunities provided by the plan, Quinton feels that when the Prudential update the plan to accept transfers from income drawdown, there will be an obvious opportunity for clients reaching age 75.
Wilkins says: “This product should be discussed with every client at or reaching retirement as well as the ones currently in drawdown.”
Harford says it will be attractive: “To all clients at retirement age who have existing pension schemes.”
Looking at the main useful features and strong points of the plan, Jarman highlights: “Income flexibility, interchangeability between segments, fund switching and lifestyle matching.” He also mentions the ability to increase income, which is not available under conventional annuities.
Quinton also mentions income flexibility, but also: “Simplification of investment unit linking without mortality volatility, payment calculation of the 10-year guarantee option, transparency of cross subsidy.”
Harford picks up on performance, flexibility, documentation, monitoring of your annuity, with-profits fund, total control and lifetime bonuses.
The strong points Wilkins identifies are: “Income and investment control. More flexible death benefits than conventional annuities but most importantly the ability to have a say in your income after age 75 as well as your death benefits.”
On the subject of the range of investment options available, the majority of the panel are in agreement.