CGU has launched its with-profits annuity available for investments of £15,000 and above. It is the ...
CGU has launched its with-profits annuity available for investments of £15,000 and above. It is the group's alternative to conventional annuities and features a guarantee that pension income will not fall below a pre-defined amount.
At the outset of the annuity the customer can select how much pension income is required by selecting an anticipated growth rate between 0% and 5% in increments of 0.5%. Once selected this can not be changed.
The higher the anticipated growth rate selected the higher the income will be at the start. However, there is a greater risk that the income may not increase, or may decline, in future years depending on the underlying performance of the fund.
Each February, with-profit bonuses may be added to the policy. There are two types of bonuses, cumulative and top-up, which apply only for the year in which they are declared. At the same time the annuity is reduced by the anticipated growth rate chosen.
John Enos, marketing and strategy manager at CGU, said: "Whatever the anticipated growth rate selected, the income is guaranteed not to fall below a minimum level, no matter what happens in the stock markets. This will be the amount that would have been paid when the pension started had an anticipated growth rate of 0% been chosen.
Commission to IFAs on the product is 1% initial but does vary depending on the arrangement the group has with IFAs. Commission is payable on the pension purchase price and excluding any tax free cash sum. There are no explicit charges for the product and charges are factored into the basic annuity.
With the recent expansion in the unit linked annuity market, independent financial advisers Towry Law has produced a comparative analysis of the main providers, which include Scottish Widows, AXA Sun Life, Norwich Union, CGU, Equitable Life and Prudential.
Clive Scott-Hopkins, an IFA with Towry Law, said: "With CGU's free asset ratio at around 30%, the highest excess of assets over liabilities of any major life office, investors can be reasonably confident for the future
"An annuitant should go for a life office with consistency of bonus results and the necessary strength of reserves to maintain their competitive position.
According to Towry Law, of those life offices offering with-profits annuities, the 1999 annual bonuses are highest with AXA Sun Life and CGU at 6.5% followed by 6% for Norwich Union and Prudential.
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