Flexibility is the name of the game
02/01/2013 | Download PDF
Adam Wrench, Head of Product and Business Development, London & Colonial, says flexibility is the name of the game when it comes to pensions as a Prudential survey reveals that expected incomes have plunged to a six year low.
“The Prudential survey made for harsh reading, with expected pension incomes now residing at a six-year low. Pensioners are left battling a stream of headwinds including longer life expectancy, rising inflation, increasing living costs all coupled with a lower income.
As such, it is absolutely crucial that when a retiree chooses to annuitize they exercise their right to the Open Market Option which means they can obtain quotes for enhanced rates in addition to regular rates.
Longer life expectancy means that someone retiring at 65 today might now be expected to live another 30 years. A lot can happen over this period of time, so locking in to what’s considered to be the “best” rate today might not be the smartest move in the long run. Locking in to enhanced rates may also not be the best option. Take an individual that qualifies for enhanced rates at 65. What if by age 75 their condition deteriorates further or at that time they suffer from another condition? They will be locked-in to the original enhanced rates and not be able to benefit from any potential uplift in income.
Far better is to choose a product which remains flexible throughout the lifetime of the client and can be regularly reviewed throughout retirement. Ideally clients want to benefit from enhanced annuity rates without the lifetime lock-in. Opting for a “Flexible annuity”, which provides the option to alter throughout the client’s lifetime as their circumstances change, and without any lifetime lock-in, could be the ideal solution.
Income over time could be improved considerably by taking such actions, as opposed to locking into a fixed rate now (whether by a conventional or enhanced annuity provider), when annuity rates are at an historic all time low, and suffering the consequences further down the line.”
Notes to Editors:
About London & Colonial
London & Colonial specialises in self-invested products for both UK residents and persons resident overseas.
The London & Colonial Group includes
(1) London & Colonial Holdings Limited – UK parent company
(2) London & Colonial Services Limited which is regulated by the UK Financial Services Authority and operates SIPPs and SSASs
(3) London & Colonial Assurance PLC which is regulated by the Gibraltar Financial Services Commission (matching UK standards) and which offers Open Annuities, QROP Annuities and Open Offshore Bonds
(4) L&C (Administration Services 2) Limited and London & Colonial (Trustee Services) Limited which are both based in Gibraltar and offer the EU SIPP.