People are living longer. Today’s generation of retirees – the so-called ‘Baby Boomers’ – are wealthier than any that has gone before it. This has effectively changed the nature of retirement completely, moving it from a relatively short phase of inactivity to a new ‘two-stage’ phase of life, where the early years (65-75) tend to be more active, compared to the latter years (75+) which can often bring some serious health problems and a greater strain on dwindling finances.
An introduction to the Fixed Term Annuity (FTA)
Get the best of both worlds ... The Just Retirement Fixed Term Annuity is an ideal solution for those clients looking for more control and flexibility in their retirement, but without investment performance risk during the selected term. It has some of the flexibility of conventional drawdown, including the ability to select an income within the GAD limits and more flexible death benefit options. The Plan can be used as an alternative to committing to a traditional lifetime annuity and also as an alternative to a conventional capped drawdown arrangement. With its optional conversion feature, it allows the client to keep their options open to convert their FTA Plan to another retirement income product, at any point during the Plan term, for any reason, if Plan Protection is selected at outset and financial advice is given.
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What are the risks?
As with all financial products, there are some potential risks associated with the Just Retirement FTA
Future income
- Whilst the maturity amount is guaranteed, lifetime annuity rates in the future are not. This means future income levels may be higher or lower, compared to a lifetime annuity purchased today.
- The Plan is designed to be held until the end of the term. If the conversion feature is exercised, the level of income received from another retirement income product may be higher or lower than the current FTA income.
Income
- The level of income is reviewed regularly and may be restricted during the term to ensure it remains within limits set by the Government.
- Your client’s situation may change after their Plan has started, but they cannot change the level of income.
Guaranteed Maturity Amount
- The higher the level of income selected at the start of the Plan, the lower the Guaranteed Maturity Amount will be.
Death benefits
- If death benefits have not been selected for your clients dependant and/or beneficiaries on their death, or those they had selected are no longer applicable, nothing further will be paid from the Plan.
- If Plan Protection is not selected, the option to convert into another retirement income product during the term will not be available.
- Your client’s situation may change after the Plan has commenced but they cannot change the death benefits selected.
Conversion Value
- Your client’s conversion value may be less than the Guaranteed Maturity Amount and the original fund value if the conversion feature is exercised.
Inflation
- Over the years inflation may reduce the real value of your clients income payments and Guaranteed Maturity Amount. They can choose to have escalation which means that their income payments would increase each year. However, the rate of inflation may be higher.
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Would you like more information?
You can download a quick guide to this product if you click on the below link:
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