Partnership Enhanced Annuity
Partnership has long been a leader in enhanced annuities and indeed in products aimed at those with poorer than average life expectancy. Later this year it is expected to revisit its enhanced annuity plan but meantime has introduced a number of changes designed to make it more appealing. As a reminded, annuities pay a regular income to the customer until they die. Enhanced annuities are targeted at those with a shorter than average life expectancy. This is typically due to their medical history or lifestyle. Although such customers could expect to pay a lot more for life insurance, the opposite applies with annuities – but only if the provider is aware of their poorer life expectancy and has adjusted the price or income accordingly. In essence, the annuity rate they get should be higher than with a standard annuity.
Partnership’s changes include:
Increasing the maximum guaranteed period from 10 to 20 years. So, if say the customer dies after just a year, their beneficiaries would receive the guaranteed income for a further 19 years if they choose the maximum guarantee. This compares to a non-guaranteed annuity, where the annuity dies with the customer.
Customers can now nominate anyone as a beneficiary, as long as the beneficiary is aged between 40 and 100.
Value protection is now offered up to 100% of the original premium. There is no restriction of the benefit at age 75 and, if they die below age 75, this ‘pot’ is tax free.
Partnership also now offers benefit-based quotes. So, if say a customer wants a guaranteed income of £30,000 a year, Partnership’s Target Income Calculator can work out how much of their pension pot would need to be invested into an enhanced annuity in order to achieve that income.
Comment: Since April, some have seen all annuities as old fashioned products that are no longer fit for purpose. That’s not correct, but certainly, the annuity market will never be the same again. Enhanced annuities never secured as much of the annuity market as they should have (too many customers simply found it easier to buy a standard annuity and were ignorant of how much extra income they could get).
But, if you want a guaranteed income for life (as two thirds of people do, according to Partnership), and your health is not great, an enhanced annuity can still be one of the best solutions. Partnership has updated its existing offering – although perhaps as just an interim response, as it is expected to launch a more radical solution later this year. Meantime, if you want an enhanced annuity, Partnership is likely to be on the shortlist.
Plus points: Enhanced annuities mean a higher income, essentially because the payout period (until the customer dies) is expected to be less; Annuities are still a very effective way to achieve a guaranteed lifetime income; Relatively minor changes, but they improve the appeal of the plan; Partnership is a leader in enhanced annuity type solutions..
Not so plus points: Annuities are now seen (since the pensions reforms came in in April 2015) as unattractive by some; Value may still be poor if the customer dies early; Those with a high need for income (e.g. to fund dementia car) but whose life expectancy is not significantly lower than average would get little or no benefit from an enhanced annuity; Partnership is expected to come up with new (and presumably better) solutions in this area later this year.
Website: http://www.partnership.co.uk.
Rating (max 10): Innovation: 7. Overall: 8. Gold
Tags: Other; Partnership