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LV= report sheds light on fixed term annuity market

Press release: 21/02/2014

Retirement specialist LV= has published a second edition ‘Fact and Fiction’ report for advisers, looking at the personal circumstances and market changes that mean clients should consider fixed term annuities.

The report highlights the fact that given the increased likelihood of clients spending 20-30 years in retirement, during which time their circumstances are likely to change, they may benefit from a solution that offers them more flexibility than a lifetime annuity.

The data in the latest report shows that following market changes in 2013 a client could potentially benefit even more from purchasing a fixed term annuity. The report identifies numerous situations where a fixed term annuity could produce a higher overall level of income for a client. For example, if a client is suffering from a medical condition that is too mild to warrant an enhanced rate now but is likely to deteriorate over time or if there is a family history of ill-health [1]. In addition, if a client’s personal circumstances are set to change as their spouse is in very poor health, they could also benefit from not locking into a lifetime annuity rate at outset.

LV= has used the latest data to create an online annuity calculator and app to help advisers identify where a fixed term annuity may or may not provide a better outcome for clients. Advisers can use these tools to create illustration charts and printable reports specific to a client’s individual circumstance.

Steve Lewis, LV= Head of Distribution said: “With people spending longer in retirement many clients would benefit from increased flexibility as to how they take their income and we believe fixed term annuities have a valuable role to play. Our report provides advisers with robust data that indicates the situations where these products can add real value.

“More advisers and customers now understand the benefits of fixed term annuities and as a result demand continues to grow. We remain committed to the fixed term annuity market and the adviser community and have launched our annuity calculator to help advisers to easily identify those clients for whom a fixed term annuity would be most appropriate.”


Notes to editor

[1] Based on a client looking to retire at the age of 60 on 1 March 2014 with a £100,000 fund available after tax free cash:

LV=’s research shows that if this client’s health has deteriorated (20% enhanced annuity) and interest rates have increased by 1%, income will increase from £4,710 to £6,080 a year – an increase of 52.6%.

LV=

LV= employs 5700 people and serves over five million customers with a range of financial products. We are the UK’s largest friendly society and a leading financial mutual.

When we started in 1843 our goal was to give financial security to more than just a privileged few and for many decades we were most commonly associated with providing a method of saving to people of modest means. Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products.

We offer our services direct to consumers, as well as through IFAs and brokers, and through strategic partnerships with organisations such as ASDA, Nationwide Building Society and a range of trade unions.

Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. LVFS is a member of the ABI, the AFM and ILAG. Registered address: County Gates, Bournemouth BH1 2NF.