Guaranteeing The Retirement You Want
02 Feb 2012
The whole idea of retirement is changing as people have to adapt to living longer at a time when stock market volatility and exceptionally low annuity rates are making it tougher to plan.
People retiring are increasingly looking to new solutions, such as income guarantees, which ensure they do not lose on income whilst having the potential to see it increase.
Guaranteed retirement saving products are often referred to as the “third way” as they provide savers with a middle way between guaranteeing their income for life now and staying invested in the stock market.
Whatever you call the products the challenges for savers are clear. For example the Department for Work and Pensions estimates that almost a fifth of Britons alive today will live to be 100, with around 875,000 people who are already retired achieving their century.
That means you can be retired for as long as 25 or 30 years, and will need retirement savings that are flexible enough to last, as well as adapting to risks from inflation and the risk of ill-health.
Investing in the stock market remains the best way to secure long-term returns but volatility, and the risks of short-term downturns when you are taking income, can make it difficult to plan with certainty.
The attraction of unit-linked guarantees for savers is that you will always receive a minimum level of income, while retaining the potential for growth.
Fear of losing money when investing has always been one of the major client concerns, and recent experience of stock market volatility has emphasised the risks. But it is not just about fear – guarantees enable savers to plan with certainty.
Guarantees potentially provide an excellent compromise between giving exposure to the stock market, which usually provides the best returns in the long term, and offering the safety net that investors look for.
Income guarantees aim to offer the best of both worlds to retirement savers by delivering a guaranteed income for life with the potential for the income to keep rising during retirement.
Instead of taking a fixed income at retirement, or taking a risk by remaining invested in the stock market, your pension fund remains invested, but with guarantees. You receive a minimum income for life whilst any gains in the value of the fund are locked in and once added they cannot be taken away, so savers are protected from stock market volatility. More importantly this allows your income for life to grow.
If you would like more information to see if this type of retirement product would be suitable for you, please contact us >>
Written by Colin Caulfield | Director
Colin is a Chartered Financial Planner & Pension Adviser Of the Year Read more >>
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