Partnership’s new 12-month enhanced annuity is designed to give savers greater flexibility, according to Andrew Megson, managing director of Partnership.
Mr Megson said the new Enhanced Choice Annuity, which guarantees income for life but with the ability to cash in after 12 months, will be offered exclusively through intermediaries and is aimed at those people who need their income but want to retain some flexibility.
He said: “Advisers can offer their clients’ access to their 25 per cent tax-free lump sum and a guaranteed income while at the same time offering them the freedom to change products if their circumstances change, health deteriorates or interest rates rise.”
The product was announced days after Just Retirement launched a one-year term option on its fixed-term annuity. The one-year term is structured like a drawdown product, allowing investors to get their lump sum, take income if they need it and choose their retirement options at the end of the plan.
However, Paul Richardson, managing director of Surrey-based Concept Financial Planning, claimed that Just Retirement’s product was a drawdown contract rather than an annuity.
He said: “Just Retirement’s one-year annuity is a drawdown contract, which represents a marketing ploy that is wrong and misleading. There is enough jargon in our industry as it is and products such as this are not helping.”
Stephen Lowe, group external affairs and customer insight director at Just Retirement, which announced to the London Stock Exchange on 12 May that it was cutting jobs across its 800-strong workforce, disputed Mr Richardson’s claims.
He said that marketing a capped drawdown product as a fixed-term annuity was “appreciated” for the added flexibility it offered.
Mr Lowe said the fact the product was written under capped drawdown was widely accepted by advisers, who were the ones that originally convinced Just Retirement to launch something to “bridge the gap” before the Budget’s proposals were implemented.
He said: “This product allows the customer to press exit and switch into another contract, and those features only come from the drawdown environment. Drawdown offers more flexibility.”
Stephen Jones, chartered financial financial planner for north Wales-based advisory firm 75point3, said: “Just Retirement’s attempt to provide a stop gap is commendable and shows quick thinking. The product features explain fairly clearly what type of client this applies to – it is a niche product and advisers should be wary of thinking it is mainstream.”