New Options
Temporary Annuities
Strictly speaking this type of
annuity is classed as a type of
Pension Drawdown, even
though it is called an annuity. It is designed for the under 75s, and there
are a couple of variants.
In a nutshell a Temporary Annuity can provide an income until age 75
(or for as little as three years), and at maturity it provides
a known (lower) figure back to you. This money is then
used to buy another annuity, or continue with drawdown. It is
similar to a drawdown contract in some ways, but
has less investment risk, since you know at the outset what your
"fund" will be worth.
The advantages:
- It defers annuity purchase
- Provides a guaranteed
(temporary) income
- Provides a known return
- If health deteriorates then
a future annuity could pay more
- It can be combined with
"value protection" to provide lump sum death benefits
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provider has now withdrawn from the UK market for the time being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 Pension 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. |