Fixed-term annuity clients who selected Plan Protection at the outset could, if they suffered health problems during the term of the plan, shop around and convert to an enhanced annuity, an option pioneered by Just Retirement last year and warmly welcomed by advisers and clients.
The specialist retirement insurer has now made Plan Protection fully flexible by allowing conversion not just on health grounds but whenever a change in personal or economic circumstances dictates. Typical examples would be if the policyholder divorces, their spouse dies or if their income needs change. All existing policyholders who selected Plan Protection at the outset will benefit from the flexibility too.
Stephen Lowe, group director of external affairs and customer insight, said:
"The conversion option appeals to retirees who want the certainty of return a fixed-term annuity offers but are wary about being locked in."
"Plan Protection is considered so valuable that more than nine in 10 buyers select it."
"All our fixed-term annuities clients must seek professional advice and the feedback from the intermediaries was that they would like even more flexibility to help clients cope with a wide range of events beyond health. We have responded by improving Plan Protection so that it offers the ability to convert to any other pension product allowable under UK pensions legislation, at any point, for any reason deemed suitable by the adviser and client."
Fixed-term annuities have been among the fastest-growing products in the retirement income market. They enable retirees to take a guaranteed level of pension benefit (within government limits) for an agreed term, usually between three and 15 years. The plans are written under income drawdown rules and at the end of the term return a Guaranteed Maturity Amount that can be used to buy another suitable pension product.
Just Retirement's fixed-term annuity now allows conversion in three areas of particular concern to those having to make important financial decisions as they move into retirement.
"Our original conversion feature could be triggered where a client hits unexpected health problems and they became eligible for an enhanced annuity under our standard underwriting criteria," said Stephen Lowe. "It gives the freedom to shop around for the best enhanced rate which could deliver a significant income boost."
"The new conversion feature means it is no longer limited to our own underwriting criteria, but is available for a range of personal or economic circumstances - the ‘what ifs?' that people in their 50s and 60s have to think about carefully at retirement."
"‘What if my partner falls ill or dies?', ‘What if we split?', ‘What if I receive an inheritance?', ‘What if annuity or GAD rates improve?', ‘What if I go back to work, or my income needs changes because of getting or losing a part-time job?'. Our fully flexible conversion feature will allow people to think again in all these circumstances."
Stephen Lowe said he felt the conversion feature would have far-reaching effects, appealing to a wider range of retirees who are keen to benefit from higher rates on longer-term investments but were reluctant to give up flexibility for perhaps a decade or more.
"We strongly believe that any client thinking about locking in to a lifetime annuity or worried about the investment risk of drawdown should consider them alongside fixed-term annuities, particularly where they are still healthy and do not qualify for an enhanced rate," said Stephen Lowe.
