Retirement specialist LV= is marketing Pension Income Plus Annuity (PIPA), a new investment-linked lifetime annuity with the protection of a minimum income guarantee.
"Investment-linked annuities are increasingly popular in the UK market, with advisers and clients alike looking for more flexible and cost effective alternative solutions to standard lifetime annuities," said Matt Trott, head of annuities at LV=. "Linking an annuity to an investment allows the fund to continue to participate in possible growth, while the guaranteed minimum income provides a secure lifetime income."
Clients can select an assumed investment return (AIR) of between 0-4% at the outset which determines their starting income and, along with investment returns, how their income will vary each year. If investment yields improve, the guaranteed minimum income (GMI) increases, and locks in a proportion of the investment returns received. The GMI will then rise by half of the percentage increase in income received above its previous highest level.
Clients are also protected by a unique guarantee that ensures the starting level of income will not reduce during the first two years of the policy, regardless of the AIR selected. After this period, clients can vary their AIR and have the option to convert to a non-investment linked conventional annuity at any time.
Trott said that with the launch of the new annuity LV= offers a simpler structure than traditional with-profits annuities. Annuity rates, he said, are available on standard and enhanced terms, with around 1,400 medical conditions qualifying for enhanced rates of up to 20%. The GMI, which is set at the 0% AIR income level and will never decrease, protects clients from falls in investment returns.