Standard Life is to launch its with-profits annuity product on 23 May, allowing investors to adjust ...
Standard Life is to launch its with-profits annuity product on 23 May, allowing investors to adjust their anticipated bonus rates and switch into a conventional product whenever they want.
IFA commission on the product will be 1% of the purchase price plus uplift and the annuity will invest in the group's £65bn with-profits fund. The flexible features have been created to allow the product to change if the annuitant's personal circumstances change significantly in the future, Ronnie Taylor, marketing development manager at the group, said.
The annuity lets the individual take a set level of income upfront between 0-5% of the value of the pension fund. At the end of the year the group declares the annual bonus on the with-profits fund, for instance 7%. If the annuitant had chosen a 0% rate then this 7% growth would be left untouched in the fund, if the individual chose 5% then there would only be 2% growth to be added to the fund.
Taylor said: "By anticipating a future rate of return, the annuitant is effectively taking future bonus payments up-front at the start of the contract. The more that is anticipated, the higher the starting level the annuity will be. If they anticipate more than actually gets declared, their pensions could fall. If they choose a lower rate the starting income will be lower but it also increases the likelihood that in future their pension will rise. The choice depends on income needs and attitude to risk."
The anticipated bonus rate can be increased or reduced at any time after the first policy anniversary and policyholders will be able to make three free changes over the lifetime of the contract. Any changes after that will be subject to charge.
The group offers a guarantee as part of the product that the capital value of the fund will never fall by more than 10% in a year, once the anticipated level of income has been taken into account. While someone taking 0% income will not see the capital value of the fund fall by more than 10% anyone taking 5% income will not see it fall by more than 15%.
An escape clause has been built into the product, allowing annuitants to switch out of the with-profits vehicle into a conventional annuity if their attitude to risk changes as they get older, Taylor said. A change may be applied at this time.
Income on the plan can be taken on a monthly, quarterly, half yearly or yearly basis.
The plan can be set up as a single life or single life plus reversionary. The minimum purchase price of the annuity is £50,000. Those who buy the with-profits annuity will not receive any windfalls if Standard Life demutualises.
Annuitants will have to sign a waiver when buying the product signing away any windfall profit rights for up to three years. The group instigated the waiver for products sold from 10 February in order to avoid carpetbagging.
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