The Living Time Annuity

The Living Time Annuity is backed by AIG, although its funds are held separately.  Strictly speaking it is classed as a type of Unsecured Pension, even though it is called an annuity. It is designed for the under 75s, and there are a couple of variants.

In a nutshell the Living Time Annuity can provide an income until age 75, and at age 75 provides a known (lower) figure back to you. This money is then used to buy an annuity or invested in an alternatively secured pension. It is similar to an income drawdown contract in some ways, but has less investment risk, since you know at the outset what your "fund" will be worth at age 75.

It can also be used to provide income for a fixed period of time, e.g. five years, and at the end of the five years assuming you're still alive a known, but lower fund is returned. As you get older annuity rates should increase so the level of income could hopefully be maintained even with the lower fund value.

This offers some flexibility and removes the investment risk, as you know what the fund will be. You still run the interest rate/annuity rate risk.

Third Way Products

Third way products have been in existence in many parts of the world for many years now, and they have started to be introduced in the UK. Although one provider has now withdrawn from the UK market for the time being due to the economic climate. 

Third way products in many ways works just like a traditional income drawdown contract, you invest your pension with them, take any tax-free cash if required, and the remaining fund provides an income. They then provide some sort of income guarantees, at a lower level than an annuity or income drawdown. Then provided you do not take more income than the maximum they allow, then they offer some sort of guaranteed income is guaranteed. 

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