Retirement specialist Just Group is highlighting a little-used option that guarantees the initial cost of the annuity or more will be paid out even if they die early in retirement.
An annuitant who selects 100% Value Protection is guaranteed to receive income for as long as they live. If they die before receiving the full amount used to purchase the annuity, their beneficiaries will receive a lump sum equal to the protected amount minus any income payments already made.
For example, at current rates a 60-year-old who opted for 100% Value Protection on a £50,000 annuity might receive £3,304 a year income. If they died after only five years, the beneficiaries would receive £33,474 (the £50,000 annuity purchase price minus the £16,525 income already paid).
Only about one-in-20 annuities purchased include Value Protection – even though it directly addresses worries that annuity buyers lose their money if they die too soon.
Stephen Lowe, group communications director at Just Group, said: “Annuities are the only retirement income solution that guarantees to keep paying a retirement income for as long as you live, helping guard against running out of money in later life. But some people naturally express concerns about dying before the initial sum used to purchase the annuity is paid out.
“Value Protection can guarantee all the of the money spent on the annuity is paid out, if not as income to them during their lifetime then as payments to beneficiaries. The cost will depend on the proportion of the fund the retiree wants to protect and their age, but we think most will consider it quite modest. In fact, the increase in annuity rates has seen the cost of Value Protection fall, effectively helping annuity buyers get more for less.”
