PensionsApr 22 2014

Just Retirement follows LV with 1-year annuity launch

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Just Retirement has followed LV’s lead by launching a one-year fixed-term annuity for retirees who wish to defer making a decision about how they will take an income in retirement until new rules come into effect next year.

The product, which Just Retirement said was in response to this year’s Budget liberalisation of pensions, enables retirees to take their tax-free cash and start taking pension income (if they want to) while avoiding investment performance risk.

Just Retirement has been shaking up it’s proposition after the retirement specialist was pummeled on Budget day, shedding £529m in value to £771m after chancellor George Osborne ditched the requirement to buy an annuity.

New rules enabling retirees to take their entire pot as cash subject only to marginal rate taxes will be consulted on ahead of planned roll out next April.

Just Retirement’s one-year annuity differs from its 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.

At the end of the term, Stephen Lowe, group external affairs and customer insight director of Just Retirement, said clients can use the guaranteed maturity amount to choose the most appropriate retirement income option available at that time.

Mr Lowe 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 one-year fixed-term annuity is a way people can start using their pension savings to fund their retirement now while giving intermediaries time to review their clients’ position next year when the details of the new rules are known.”

“We are in a time of transition when the retirement income landscape is facing a massive upheaval. 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.”

The launch of this annuity comes just a fortnight after Just Retirement completed a £36.5m bulk annuity deal for a shipping industry pension scheme, the biggest underwritten defined benefit de-risking transaction completed to date in the company’s business division.

The group also expects to complete several smaller transactions, which will bring its total premium income from defined benefits de-risking to £80m for the year to 30 June 2014.