READING, England, August 9, 2013 /PRNewswire/ --
"Wednesday's announcement from the new Bank of England Governor Mark Carney that interest rates will remain at the current level until unemployment falls below 7% will hit current retirees hard" says Kim Lerche-Thomsen, CEO and Founder of Primetime Retirement. "Retirees are caught between taking their annuity now and locking in to the current historically low interest rates or waiting until rates improve in possibly 3 or more years time.
However, many retirees need income now and can't afford to wait so what they really need is an alternative to tide them over until rates pick up. One solution is a Fixed Term Annuity that can provide the retiree with an immediate income while allowing him or her to defer the purchase of a lifetime annuity until later. Four companies currently offer this short term solution of which Primetime Retirement, (previously known as Living Time) was the first in 2006.
It is easy to see why hard pressed retirees may choose this solution as they can take the same level of income as a lifetime annuity now whilst only needing interest rates to pick up by 1% or more to buy the same income in 5 or 6 years time. The table below illustrates this point.
Best in market Primetime Increase in interest rate in Retirement 6 years to Lifetime annuity Income payable for purchase same rate as Best in Market GBP per 6 years - GBP per Age annum annum rate now 55 GBP4,002 GBP4,002 None 60 GBP4,396 GBP4,396 < 1/2% 65 GBP4,769 GBP4,769 < 1%
Clearly this is not guaranteed and indeed rates may stay the same or fall but once a retiree locks in to a lifetime annuity they are stuck with that rate for life with no chance of gaining from interest rises in the future.
1. Net investment of £100,000 after an adviser fee of £2,000 is deducted
2. Source: Avelo. Annuity payable monthly in advance, no escalation, 5 year guaranteed period with spouse's annuity of 100% without proportion and with overlap. Spouse's age assumed to be 5 years younger
3. Includes value protection, namely return of investment less any income paid
4. Rates assume that the maturity amount available from Primetime Retirement is invested in a lifetime annuity and that annuity rates remain unchanged except for a change in the rate of interest. It is also assumed that a 1% change in interest rates is approximately equal to a 8% change in the annuity rate
By deferring the purchase of a lifetime annuity, the retiree is also able to keep his or her options open in case their circumstances change. If they suffer the misfortune of deteriorating health they may be able to purchase a lifetime annuity at a better rate once the fixed term comes to a close. They also have the comfort of knowing that their fund is not lost should they die before the maturity date.
As pioneers of the Fixed Term Annuity we believe that retirees should be made aware of alternatives to the lifetime annuity before making an irrevocable decision that they may come to regret." says Lerche-Thomsen.
More details are available at http://www.primetimeretirement.co.uk
Notes to editors
Primetime Retirement (as Living Time) was the pioneer of the Fixed Term Annuity in 2006 and has campaigned under the Offer More Options banner for retirees to be offered more options at retirement.
About Primetime Retirement
Primetime Retirement Limited is registered in England, number 06950170 and is authorised and regulated by the Financial Conduct Authority, reference 505240. Primetime Retirement is the distributor of the Primetime Retirement Plan. The structured deposit plan providing the guarantees of the Primetime Retirement Plan is provided by Investec Structured Products. The Primetime Retirement SIPP is provided by Pointon York SIPP Solutions Limited. Deposit taking business is currently covered under the FSCS up to a maximum of £85,000 per authorised institution. Further details can be found at http://www.fscs.org.uk
For more information, please contact:
Kim Lerche-Thomsen, CEO and Founder
SOURCE Primetime Retirement