Fixed term annuities can benefit clients in the right situation and should be given full consideration by advisers dealing with clients approaching retirement, according to a report.
Retirement specialist LV= commissioned a report on the fixed term annuity market amid industry concerns about their suitability.
The findings of the report indicate that a modest increase in gilt yields could make a fixed term annuity a worthwhile strategy for many more retirees. It also found that if gilt yields returned close to the average yield seen between 1994 and 2012, a fixed term annuity "would be appropriate for most clients".
It added if a client has a spouse that is in very poor health, they could also benefit from not locking into a lifetime annuity rate at outset if the spouse's benefit is over 50%, or if the spouse is materially younger than the main applicant.
LV= added a fixed term annuity should also be considered if a client has or is likely to develop a medical condition that could then qualify them for an enhanced rate of 20% or more further down the line.
Steve Lewis, LV= head of distribution said: "We believe there are many circumstances where fixed term annuities provide a higher overall income in retirement, and our report gives advisers solid data proving that in the right situation, fixed term annuities add real value.
"It is important that those at and approaching retirement have a choice as to how they structure their income and fixed term annuities can offer greater flexibility, especially with the advent of break clauses."
Last month, Metlife pulled out of the market but LV= said it remained committed.
"We want to support advisers and help them to feel confident discussing fixed term products with clients," Lewis added.
Actuarial consultancy Milliman was commissioned by LV= to provide the modelling for the comparisons used in the report.
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