More than three quarters (77 per cent) of specialist retirement income advisers expect the fixed term annuity market to grow in the next two years, according to research from retirement income specialist Primetime Retirement.
IFAs anticipating growth think that on average the market will grow by 26 per cent.
The research also revealed that more than three in four (76 per cent) specialist retirement income advisers have seen a rise in the number of retired people coming to them for advice in the past year. With high inflation, record low interest rates and annuity rates combined with the fact that people are living longer, Primetime Retirement thinks this trend is set to continue – indeed the research showed that four in five (79 per cent) IFAs expect to see an increase in the number of clients asking for advice about annuity purchase in the next 12 months.
The average lifetime annuity (LTA) rate offered by the top five providers for a male aged 65 investing GBP100,000 (with a five-year guarantee) is currently GBP5,474 p.a. whereas the maximum GAD income for the same client and investment is GBP5,500 pa. Primetime Retirement can currently offer the same client an income of GBP7,704 p.a. (subject to GAD). Matching the income from the average of the top five LTA providers with a Primetime Retirement Plan over five years would give the client a maturity lump sum of GBP82,212.
Primetime Retirement chief executive Kim Lerche-Thomsen says: “Flexibility is prevalent throughout other areas in financial services, so why not for retirement income products? Despite people living much longer, a person’s health and family circumstances are unpredictable. Fixed term annuities allow those in retirement to determine which type of annuity suits them best in stages throughout the latter part of their life. Those who are in good health and still working want to keep their options open in retirement and need retirement income solutions which are flexible enough to adapt.”
Primetime Retirement, which pioneered the fixed-term annuity in the UK as Living Time, believes the research highlights the income gap facing many people in retirement – and the need for increased flexibility and innovation in retirement income solutions. Primetime Retirement has seen strong demand from IFAs and clients as low annuity rates drive interest in alternatives to conventional annuities including fixed-term annuities.
Kim Lerche-Thomsen says: “With an anticipated rise in retirement income and purchase advice, advisers have a genuine opportunity to add real value to their retirement business at a time when clients approaching or at the point of retirement are changing their views on what retirement means.”
Primetime’s research showed that the main concern for clients when asking for advice about retirement income was not having enough income cited by four in five (81 per cent) IFAs. Nearly two thirds (64 per cent) highlighted death benefits and ensuring their client’s spouse/partner is financially secure as the main concern. And more than two in five (44 per cent) IFAs suggested their clients are primarily concerned about retaining flexibility over retirement income.