FTAdviser.com

Advertising

A revamped range of six mortality uplift longevity income plans for investors aged between 75 and 80 years old, aim to provide enhanced growth, according to Life Trust.

Since the company launched in January this year, two Longevity Income plans have been available, including one that pays income from age 75 and the other that starts payments from age 80.    

With the four new additions, the expansion has also improved its flexibility by reducing the minimum investment period from 10 years, to five years, and by introducing a surrender value option after two years.

Returns are dependent on three factors including the performance of the funds selected, the longevity of other planholders and how long the planholder lives, together with the allocation of birthday units to surviving planholders each year – a unique feature of the plan. This mortality uplift means investors could experience enhanced income growth.

Andy Briscoe, chief executive for Life Trust, believes providing more options will cater for the rising demand in retirement planning.

He said: "We have been delighted with the reception the longevity income plans have received and it is encouraging to see the new level of interest around the industry about mitigating longevity risk. As a consequence a number of our IFA partners have asked us to extend the age options available with the longevity income plans and we are pleased to have responded to adviser feedback so swiftly.”

The single premium investment product works where money will be invested at the outset into a choice of carefully selected, popular funds from industry-leading fund managers to suit the investor's risk profile for a minimum of five years, which is aimed to provide returns to planholders with a rising income for 20 years.

Once the planholder reaches a pre-specified vesting age, the plan begins to pay out annual payments, which are paid on the planholder’s birthday, which are intended to rise the longer the planholder lives.

Investment starts from £5000 to £1m and there is a minimum five years from the beginning of the plan to kick-start income payments.

If a planholder's circumstances change after two years of being invested, they can surrender the plan. The surrender value is the original investment less the initial charge or the current fund value minus any birthday units, whichever is lower.

There is a guarantee to receive the original investment back, either through annual payments under the plan and/or from the death benefit paid to the planholder's estate, trustee or assignee, should the planholder die early.

Martin Bamford, joint managing director for Surrey-based IFA Informed Choice Ltd, believes the plan offers an interesting sales angle but is unlikely to attract much attention from professional advisers who charge fees for advice.

He said: "These new options increase the flexibility available to clients but will also make an already complex concept more difficult for advisers to explain. Better life expectancy is clearly a concern for some people from a financial planning perspective and it is important to understand how they fit into overall income and capital requirements in later life.

"The comparison will always be between this sort of plan and a clean investment, where a client has greater control over income levels and withdrawal of capital. Many investors simply do not trust insurance companies, particularly when total returns are dependent on how long you survive.  Comparisons will rightly or wrongly be drawn with conventional annuities which some investors avoid at all costs because of this factor."