Niche retirement product expected to be popular with early retirees

News - Living

Written by Ray Clancy

Tuesday, 09 February 2010 09:26

Financial experts have welcomed the launch of a new retirement plan that offers a secure income for a fixed period without locking investors into a lifetime deal.

They also hope that the Protected Lifetime Plan from LV, which gives customers a fixed income and guaranteed maturity value at the end of the term and a wide range of death benefit options, could encourage other products into the market place.

It is the first fixed term retirement product from retirement solutions provider LV which said it has been developed for retirees who want the security of a fixed income over a fixed period as well as the flexibility to review their options at the end of the plan.

‘A lifetime annuity is not the ideal option for people who don’t want to be locked into a product for the rest of their life as their personal circumstances may change, and where they would miss out on any beneficial future legislation or new products,’ explained Matt Trott, head of annuities at LV.

It is the latest addition to the growing third way annuity market which had sales of over £1 billion in 2008 and it is increasingly popular among early retirees.

‘Giving people the ability to reassess their retirement income needs after set periods, means that they can benefit from a product that suits their individual requirements at a particular time,’ added Trott.

At maturity customers have the flexibility to buy a lifetime annuity based on their needs then, or transfer to an unsecured pension, or invest in another PRP subject to eligibility?

The industry says it offers more choice. ‘Many clients would like to defer annuity purchase but cannot afford either the risk of USP or the loss of income associated with deferral. This product enables a client to defer annuity purchase without deferring the income,’ explained Bob Bullivant of Annuity Direct.

It could also encourage expansion in the sector, according to Sean McCabe from Chartwell Annuity Centre. ‘Competition in this space will encourage other retirement product providers to look at this type of plan. Many individuals like the guarantees offered by conventional annuities but also want some degree of flexibility, should their circumstances change in retirement. The Protected Retirement Plan aims to do just that as there is no investment risk as a Guaranteed Maturity Value is agreed at outset and the income selected is guaranteed for the term of the plan,’ he explained.

‘We feel that as more companies come into this market, this will become more mainstream rather than being viewed as a niche,’ said Tony Clark from Openwork Market Solutions.

And Nick Flynn of The Retirement Adviser said that the fixed term annuity market is building steadily as individuals and advisers are looking for viable alternatives to conventional annuities.