With so much economic and political turbulence, it’s hard to predict where markets will go next. And in times of uncertainty, anything that can provide guarantees can be an important consideration for clients. Especially for those with a low to low medium attitude to risk, those with less capacity for loss or those already in retirement.
Pension freedoms brought flexibility and choice to clients. Whilst this gives clients more options it also means the pension funds they are relying on to provide retirement income are susceptible to market volatility. This is becoming increasingly important for those transitioning into retirement.
It is certainly true to say that retirement isn’t what it used to be. Rather than a working life with one organisation and a nice final salary pension at the end of it, most people now work for a number of different organisations in their career, with increasing money in defined contribution schemes. This means multiple pension pots and more complex decisions to make to ensure the best outcomes. Most people also now transition into retirement over time, perhaps reducing their hours for a period before leaving working life completely. These changes along with pension freedoms mean there is a need for products that provide flexibility around savings and guarantees around income.
Whilst a number of providers with a guaranteed income drawdown product have left the market in recent years, the demand for such solutions that offer both flexibility and security continues to grow. I believe that being able to provide clients with the comfort of a guaranteed income over a fixed period, with a guaranteed maturity value, is invaluable for many.
Fixed term annuity products enable clients to fix an income over a defined period (usually between 5 and 25 years) with some or all of their retirement fund. Some providers, offer clients the flexibility to stop the plan at any time if their circumstances change.
The advantage of using a fixed term annuity product as part of a wider portfolio of investment funds is that customers can enjoy the security of a guaranteed income for a fixed period whilst the remainder of their retirement fund is invested for growth. Once they come to the end of the fixed term, their invested fund will provide for the next stage of retirement.
The security a guaranteed income provides means fixed term annuities should be a key consideration in the retirement income planning process, whether as standalone product or as part of a blended income investments solution. Think of it as a secure portfolio underpin, or just helping your client sleep easily at night during retirement.
This article has been written by Andrew Gilbert, Head of Products and Proposition at LV=
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