LIFE OFFICE LAUNCHES INVESTMENT ANNUITy LINKED TO A RANGE OF 21 FUNDS
Clerical Medical this week launches an investment annuity alongside a traditional annuity product.
The company said its Invested Annuity, which has the option to link to 21 inhouse Insight-managed funds including the company's with-profits fund, is designed to offer transparency by publishing the calculations used to determine the annuity rate. The other product, branded Secure Annuity, is a standard annuity.
Clerical Medical said it wanted to launch an annuity that was flexible and transparent and fitted in with the Sandler guidelines. Nick Cooper marketing manager, post retirement planning at the group, said the mortality and bonus declarations in the with-profits linked Invested Annuity had been separated out, which meant consumers could see exactly how their annuity rate had been calculated.
Typically, he said, annuity rates in with-profits annuities are varied by adjusting mortality and bonus declarations. As consumers were not told the changes to mortality assumptions this meant the charges were not transparent to them. 'For instance we know that other offices have the ability to offer negative bonus rates,' he said.
Mortality rates used by Clerical Medical are varied in line with changes to the mortality tables produced by the Continuous Mortality Investigations Bureau. Rate adjustments on the annuities are capped at 0.5% per year, which Cooper said is adequate as mortality shifts, when they happen, are not big and do not occur often.
As well as the option to invest in the with-profits fund, the Invested Annuity is linked to 20 unit-linked funds investing in equity funds through to cash and property funds. Switching between the 20 unit-linked funds is offered at no charge. However once an investor's annuity is set up, switching into or out of the with-profits fund is not allowed.
An annual management charge of 1% applies to both annuities and intermediary commission is set at around market rates, 1% plus uplift, said Cooper.
Minimum investment in the Secure Annuity is £5,000 and £25,000 in the Invested Annuity.
The Invested Annuity offers the option to choose a range of expected growth rates between 0% and 5%. The choice of rate can be made in 0.5% steps.
Annuity holders will also be able to switch from the Invested Annuity to the Secure Annuity on each anniversary of the annuity start date for free.
Several options will be available on the Secure Annuity: guaranteed income, spousal annuities, escalation and linkage to the Retail Prices Index to protect against inflation.
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