Case History
Mrs S was approaching her 60th birthday and wished to retire. Her open market option was £64,000.00 and she approached Wrightway Financial Consultants to explore the alternatives that were open to her. She was fully aware that her life expectancy was, according to government actuarial rates a further 25 year and also aware that inflation, whilst currently low, was likely to rise in the future.
Her current provider offered a full pension of £2,956 p.a. or tax free cash of £16,000 and a reduced annuity of £2,746 per annum based on a single life with no guarantees.
However, to complete some outstanding jobs on her house and to maximise her lifestyle she decided to take her tax free cash entitlement of 25%. This amounted to £16,000 leaving an open market option of £48,000.
We explained the various annuities that were available - single life, joint life, escalation, guarantee periods and produced the following quotations for perusal:
Single Life (Canada Life)
- full fund, no guarantee - £3,898.80
- full fund, guarantee 10 yrs - £3,875.64
- full fund, guarantee 10 yrs, RPI escalation - £2,173.08
- reduced fund after tax free cash, no guarantee - £2,917.32
- reduced fund after tax free cash, guarantee 10 yrs - £2,900.04
- reduced fund, guarantee 10 yrs, RPI escalation - £1,626.00
Joint Life 50% spouses benefit
- full fund, no guarantee - £3,809.04
- full fund, guarantee 10 yrs - £3,797.28
- full fund, guarantee 10 yrs, RPI escalation - £2,111.76
- reduced fund after tax free cash, no guarantee - £2,849.88
- reduced fund after tax free cash, guarantee 10 yrs - £2,841.12
- reduced fund, guarantee 10 yrs, RPI escalation - £1,580.04
There remains a second alternative which, is the investment annuity which comes in various forms such as Unit Linked, With Profit and I have listed below a product called Income Choice.
As previously mentioned with life expectancy of some 20 years and the very real prospect of inflation increasing it makes sense to have some form of increase or escalation to your income. This annuity gives you the opportunity to invest on a medium to low risk basis instead of being fixed to interest and gilt rates as per a conventional annuity and are linked to a much wider range of investments, stocks, shares, commercial property, fixed interest and cash etc. and it gives the fund greater potential for growth.
