When it comes to retirement income in an uncertain market, one way to get a little certainty is with a guarantee option.
With consumers demanding a more acceptable level of guaranteed income in retirement without the constraints of a conventional annuity, US-style variable annuities are becoming an increasingly popular choice for UK investors.
These products provide a solution which covers the middle ground between traditional annuities and income drawdown. The major advantage these products offer is that they allow people to remain invested in the markets with the option to guarantee an income for life. They offer the security of a conventional annuity but with greater flexibility and growth potential.
A secure income regardless of how investments perform
With a guarantee, pension investors have the assurance that their income will not fall below a minimum amount, regardless of the performance of their chosen investments. The value of this is immense during periods of sharp market decline, where pension investors without a guarantee could find their income falls significantly below the minimum income they need.
The confidence to take risks
With people potentially spending longer in retirement, it is becoming imperative for people to take greater investment risks in order to generate higher returns. The fear of losing the contents of their pension pot means many people will shy away from equities. However, it is possible with long term equity exposure that investors will have the potential to meet their desired levels of income throughout their retirement.
Taking out a guarantee can give advisers and their clients the confidence to look to equity markets for investment opportunities, rather than with the fear that a blip in performance could seriously affect their income in retirement.
A guaranteed income for life
Crucially, unlike drawdown, the risk of funds running out is removed. Income payments will always be taken from the fund to which the income guarantee applies until the value of the fund reduces to zero. Should the value of the fund ever reduce to zero, the provider will continue to pay a regular income each year for the remainder of the policyholder's life, equal to the guaranteed minimum income current at the time.
Peace of mind for a relatively small extra cost
The peace of mind in knowing that income cannot dip below a certain level no matter what misfortunes might hit the investment markets typically costs less than 1% per year. In today's climate, some might say that's priceless.
Helping to make things clearer
For more information or to arrange a meeting with a Lincoln Business Development Manager, please call us on 0845 642 22 22 or visit www.lincoln-ifa.co.uk
Lincoln i2Live – the flexible retirement income solution with Income Guarantee Option
- Lincoln i2Live offers three products under one umbrella and allows clients to accumulate a retirement income pot with a range of flexible options on taking an income in retirement. Crucially, the flexible income opportunities do not end at 75. Lincoln i2Live takes clients and their dependants through retirement.
- i2Live Accumulator is a personal pension plan allowing clients to consolidate their pension assets under one plan and then build up additional funds taking them through to retirement. It offers a wide range of investment fund options which can be continued on conversion.
- i2Live Drawdown is an unsecured pension plan providing flexible income up to age 75. Clients can then convert to i2Live Annuity if they wish. The fund is available on death to provide a choice of death benefits to suit dependants' circumstances.
- i2Live Annuity is a flexible, unit-linked annuity offering income flexibility for life (similar to pension withdrawal). It offers income on death to dependants through the joint life option or through the dependant's guarantee period option. Customers can maximise income if no death benefits are required.
The Lincoln i2Live Income Guarantee Option:
The Income Guarantee Option is one of the most important features of Lincoln i2Live. Here are just some of its features at a glance:
- Guarantees 75% of the 'maximum supportable income' (the yearly income that the fund could support throughout life).
- Can be applied to all or part of the fund, depending on the level of security required.
- Can be turned on and off on an annual basis, up to age 89, providing security as and when it's required.
- If used continuously, the guaranteed level of income will be reviewed every five years, ensuring that the guarantee remains a valuable feature and a highly effective safety net.
- Having the Lincoln i2Live Income Guarantee Option will involve an additional yearly charge of just 0.95% of the value of the fund to which the income guarantee applies.
- Underwritten by Lincoln National Corporation (LNC) providing the reassurance of financial strength and stability.
For more details about Lincoln i2Live please click here
About Lincoln Financial Group
Lincoln Financial Group is the UK business name of Lincoln National (UK) PLC and its UK subsidiary companies.
Lincoln National Corporation, the parent group, is listed as LNC on the New York Stock Exchange and is one of the world's largest organisations, placed in the FT Global 500 in 2007. Lincoln National Corporation was founded in 1905 and has a proud heritage of over 100 years financial strength and security, with long term credit ratings* (as at 8 April 2008) of 'A+' from Standard & Poor's, 'a' from AM Best, 'A+' from Fitch and has assets under management of more than $237 billion (as at 31 December 2007) and more than $10.6 billion in annual revenues (for the year ended 31 December 2007).
The UK operation dates back to 1934 with assets under management of £5.33 billion (as at 31 December 2007). Lincoln in the UK is passionate about doing the best for its customers at or in retirement, by bringing to the market reliable and flexible solutions which enable transition through retirement, protecting and enhancing wealth to enjoy an income for life. It serves the needs of customers nationwide either direct or through financial advisers and is dedicated to building excellent customer service.
In the UK, Lincoln Financial Group includes Lincoln Assurance Limited, Lincoln Investment Management Limited and Lincoln Unit Trust Managers Limited, which are each authorised and regulated by the Financial Services Authority. Any information offered will relate to the life assurance, pension and unit trust products and services of the Lincoln Financial Group, or may relate to other types of products or services of carefully selected partner companies not part of the Lincoln Financial Group. No personal financial advice or recommendations will be given.
*All ratings have a "stable" or creditwatch positive outlook as defined by the respective agencies.
Joined as head of strategy, multi asset, in June
Group income protection
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Set to become part of Single Financial Guidance Body