LV= announces Pensions Income Plus Annuity

LV= announces Pensions Income Plus Annuity

LV=, the UK’s largest friendly society, has launched a Pension Income Plus Annuity (PIPA) which combines a high level of initial income with the guarantee of an minimum income.

It is structured more simply than traditional with-profits annuities and offers enhanced terms, value protection and competitive starting incomes.

Clients can take out a PIPA with an assumed investment return (AIR) of between 0-4 per cent at the outset

This will determine their starting income and although income will vary each year, the minimum income guarantee protects against falls in investment returns.

An improvement in investment return generates an increase in the guaranteed minimum income.

Matt Trott, LV= Head of Annuities said: “Investment-linked annuities are increasingly popular in the UK market, with advisers and clients alike looking for more flexible and cost effective alternative solutions to standard lifetime annuities.

“Linking an annuity to an investment allows the fund to continue to participate in possible growth, while the GMI provides a secure lifetime income”.

A recent report in the Financial Times suggests that lifetime annuities, such as the LV= PIPA, may be a better option than fixed-term annuities, which were launched in the UK just five years ago.

Many investors have turned to fixed-term annuities due to a significant fall in income from lifetime annuities.

However, industry experts warn that while fixed-term annuities are a more flexible option than lifetime annuities, they may not provide as high an income as lifetime annuities.

One advantage of fixed-term annuities is that death benefits, net of inheritance tax, can be passed on to beneficiaries, while this is not allowed with conventional annuities.

They may also be useful for investors who do not wish to tie themselves down to a fixed annuity rate for life.

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