Responding to reforms to pension rules outlined in the Budget, the retirement specialist believes some people approaching retirement will want to wait to see what new choices might be available to them in April 2015.
Just Retirement’s 1-year fixed-term annuity enables retirees to take their tax-free cash and start taking pension income (if they want to) while avoiding investment performance risk. At the end of the term clients can use the Guaranteed Maturity Amount to choose the most appropriate retirement income option available at that time.
Stephen Lowe, Just Retirement's group external affairs and customer insight director, said:
“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."
“We recognise that there are many questions still to be answered and some professional intermediaries may prefer, at this point, to utilise a short term solution for their clients’ funds."
“At times of uncertainty people like to keep their options open. Our 1-year fixed-term annuity is a way people can start using their pension savings to fund their retirement now whilst giving intermediaries time to review their clients’ position next year when the details of the new rules are known.”
Just Retirement said the 1-year fixed-term annuity will be suitable for those who may want to take tax-free cash or require an income, and for those who do not want to be exposed to investment performance risk.
The 1-year option has the same features as Just Retirement’s standard fixed-term annuity in that the level of income selected (within current limits) and the Guaranteed Maturity Amount are chosen in advance so the client knows exactly how much income they will receive, for how long and what the final return will be.
It differs from the standard plan in that there is no conversion feature available, it is available to pension savers aged up to nearly 89, the income must be level (no escalation) and the minimum fund size is £18,750 net of the tax-free lump sum.
“We are in a time of transition when the retirement income landscape is facing a massive upheaval,” said Stephen Lowe. “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.”
