The PRP has been developed for retirees who want the security of a fixed income over a fixed period, as well as the flexibility to review their options at the end of the plan. A lifetime annuity is not the ideal option for people who don't want to be locked into a product for the rest of their life, as their personal circumstances may change, and where they would miss out on any beneficial future legislation or new products.
Matt Trott, head of annuities at LV=, said:
"The launch of the PRP is the latest addition to the growing ‘third way' annuity market, which had sales of over £1bn in 2008. As a responsible provider of flexible retirement solutions, this was the natural progression in our product development and something we feel early-retirees will appreciate hugely.
"Giving people the ability to reassess their retirement income needs after set periods, means that they can benefit from a product that suits their individual requirements at a particular time.
"Effective retirement planning needs to be as flexible and fluid as possible to reflect the wider pensions landscape and the demographic of today's retirees. The new LV= PRP product enables consumers to retain choice over their changing retirement needs."
A Trustee Investment Plan (TIP) version is available to allow IFAs to combine the security offered by the Protected Retirement Plan with the full investment options available under a SIPP. This allows IFAs to design an income and investment solution specifically suited to an individual's risk appetite.
The main features of the LV= PRP include:
- Customers of the PRP can pick any term between three and 25 years (after 6 April 2010, any term between three and 20 years) as long as the plan ends before they reach age 75 .
- They receive a fixed income (subject to Government Actuary's Department (GAD) limits) for a fixed term, with a guaranteed maturity value.
- They can choose any income level (within GAD limits), including no income at all.
- Both the income and the maturity value are fully guaranteed (any income not paid due to applying the GAD limits is paid when the plan ends). You cannot change the basis of your plan or cash it in at any time.
- The product is designed under unsecured pension (USP) rules to maximise flexibility of options at the start of the plan and when the plan ends. The PRP can accept transfers from both crystallised and uncrystallised funds, with a minimum investment of £10,000.
- It offers a variety of death benefit options, allowing either continued income or a lump sum, including:
1. a joint life option
2. income guarantee, ensuring income is paid for a minimum period
3. value protection, up to 100% of capital (less any income paid) returned if the customer dies before the end of the plan
4. dependant's income - they receive a proportion of the customer's income and maturity value.
- At maturity customers have the flexibility to buy a lifetime annuity based on their needs then, or transfer to an unsecured pension, or invest in another PRP subject to eligibility.
Trott added:
"This new product fits into our suite of retirement options extremely neatly. For those wanting the full flexibility of drawdown, we are able to offer our award winning Flexible Transitions Account. For those wanting a fully guaranteed income for the rest of their life, our enhanced annuity offers exceptional rates.
"The Protected Retirement Plan now offers those customers in good health, who may be concerned about the low annuity rates currently on offer in the market, an effective alternative to the traditional lifetime annuity."
Comments from financial advisers on the LV= Protected Retirement Plan
Bob Bullivant of Annuity Direct said:
"Annuity Direct is delighted that LV= has decided to join this market. Many clients would like to defer annuity purchase but cannot afford either the risk of USP or the loss of income associated with deferral. This product enables a client to defer annuity purchase without deferring the income."
Sean McCabe from Chartwell Annuity Centre said:
"I believe that competition in this space will encourage other retirement product providers to look at this type of plan. Many individuals like the guarantees offered by conventional annuities but also want some degree of flexibility, should their circumstances change in retirement. The Protected Retirement Plan aims to do just that as there is no investment risk as a ‘Guaranteed Maturity Value' is agreed at outset and the income selected is guaranteed for the term of the plan."
Stuart Bayliss from Directly Financial said:
"It is very welcome to see LV= entering the fixed term annuity market. Having successfully offered specialist retirement products for many years LV= is now correct in identifying temporary annuities as a growing and important opportunity. From an adviser perspective, it is also useful that more providers are entering this market."
Tony Clark from Openwork Market Solutions said:
"It's good to see LV= is leading the way now, with a plan that is straightforward and has all the options a client would need packaged into one product. We feel that as more companies come into this market, this will become more mainstream rather than being viewed as a niche."
Nick Flynn of The Retirement Adviser said:
"The fixed term annuity market is building steadily as individuals and advisers are looking for viable alternatives to conventional annuities. Further competition in this market is most welcome to create further value. LV= has a strong brand that clients approaching retirement can relate to, in addition to their relevant experience of the retirement income market."
Laura Goodman of Rockingham Retirement said:
"As an independent retirement income specialist, Rockingham welcomes new initiatives and products which will ultimately benefit pensioners - choice in the wider market is the key to securing a better standard of living at a time in our lives when we need it the most."
The PRP is supported by LV='s experienced nationwide sales team, and quotations are also available from The Exchange.
