Last week we reported another round of record sales from Reigate based annuity provider Just Retirement. Part of the company’s success has been down to the increase in sales from it’s Fixed Term Annuity product which helped to contribute to an overall annuity revenue close to £1.2billion. No doubt with rates continuing to fall, alternative products which offer greater flexibility are likely to increase in popularity in the future. Indeed the company revealed that since the middle of last year when they launched their FTA product, quotations have been up 10% on each successive quarter with applications up 35% quarter on quarter.
Stephen Lowe, group director of external affairs and customer insight says fixed term annuities have cemented their place in retirement income planning stating that they…”…have become established as one of the four options for retirement income.” Many of those coming up to retirement age will no doubt want to avoid being locked into a lifetime rate whilst they are so low. A fixed term annuity allows someone to draw an income from their pension fund without converting 100% of the value, leaving them the option to potentially benefit from any future changes in rates and/or their health. A lump sum is paid on maturity which can be used to buy another annuity or other retirement income product. As an extra incentive, Just Retirement also built in the option that allows annuitants to exit their FTA if they become eligible for an enhanced annuity during the term.
The company describes it’s client base as “quite diverse“ including those who would have normally bought a life annuity but who are wary of being locked into a low rate for life, as well as individuals who have taken drawdown plans but who have not made the returns they would have been hoping for. Although low rates are helping to drive interest in FTA’s, flexibility is certainly the big attraction. Mr Lowe says that a healthy 65 year old has a 30% chance of their health deteriorating within a decade and a 40% chance of it deteriorating inside 15 years of retirement. He added that one of the best rates was only available before treatment has started, underlying the benefit of the company’s conversion feature.