LV= and Just Retirement have each launched one-year fixed-term annuities in response to the recent post-Budget shakeup to the pensions system. The reforms, which come into force in April 2015, will mean that anyone aged 55 or over will be able to take their entire pension pot as cash if they wish to do so, rather than having to buy an annuity.
Bridging the gap
The new products launched by LV= and Just Retirement consist of one-year fixed-term annuities, and are designed for people at the brink of retirement who want to defer making a long-lasting decision about how they will take their pension income in retirement until new rules come into effect next year.
Just Retirement’s one year annuity allows retirees to take their tax-free cash as well as giving them the option of starting to take pension income while avoiding investment performance risk. At the end of the term, customers can use the guaranteed maturity amount to choose the most appropriate retirement income option available once the new regulations commence next year. It’s believed by many industry experts, including LV= life and pensions managing director Richard Rowney, that some people approaching retirement will want to wait to see what new choices might be available to them in April 2015. Fixed term one year annuities are intended to cater for this client group.
A range of options
Commenting on the changes, Rowney said: “There will be a 12-month delay until all the latest changes are implemented and the industry goes through a period of transition. We believe that fixed-term annuities will play an important role in offering those approaching retirement a guaranteed income, without limiting their future options.”
Stephen Lowe, Just Retirement’s group external affairs and customer insight director, added: “The significant changes announced by the Chancellor in the Budget are naturally making people nearing retirement think carefully about how to get the most from their pensions.”
One of the key features of the new one year annuities is their flexibility. As Lowe says: “At times of uncertainty people like to keep their options open. We are in a time of transition when the retirement income landscape is facing a massive upheaval. We shouldn’t forget that many tens of thousands of people will want to retire and most will need to switch on a regular income. Fixed-term annuities are one-way of making the transition into retirement while waiting for the dust to settle.”
