Message from Legal and General

As you know in April this year we launched our Fixed Term Retirement Plan. However my email today focuses on the uses of the ‘nil income’ option the plan offers. With this option, the plan simply pays out a pre-set maturity amount at a fixed date in the future.

For clients looking for alternatives to a low/cautious risk investment

Choosing a nil income option together with a full term guaranteed payment period allows your client to lock away their money for a chosen period, safe in the knowledge of what they will get back. The maturity amount is set at outset, and the guaranteed period means that the maturity amount will be paid on the set date in the future, whether your client survives the term or not.

For clients looking for lump sums if they reach older ages

If your client wants to withdraw amounts from their pension pot as and when they choose, but are also concerned about running out of money before they die, then using a blended approach could prove valuable. In this scenario, rather than keeping the full amount in a drawdown plan, your client could invest an amount in our Fixed Term Retirement Plan, choosing nil income and an end date at older age. This provides an injection of funds provided that your client survives until that age, allowing them to drawdown their other funds in the meantime without the worry of running out.

For example: Your client is aged 60 and has a pension pot after tax free cash of £300,000. They invest £250,000 in a flexi access drawdown pension plan to take amounts from as and when they need. Your client also invests £50,000 in a Fixed Term Retirement Plan choosing nil income and a term of 25 years to end at age 85. Legal & General set the maturity value of the plan to be £131,500 at the end date.

If your client survives until age 85 and the full amount invested in the drawdown pension has now been depleted, then the Fixed Term Retirement Plan will provide £131,500 that your client can use to top up their drawdown plan and continue to take income as and when they need.

Please note, in this example no guaranteed payment period has been selected, so if your client died before they reached age 85 when the plan term comes to an end then the maturity value would not be payable.

The Fixed Term Retirement Plan is a fixed term annuity. The income, term and maturity amount cannot be changed once the plan is set up. If your clients’ circumstances change they will not be able to change their payment options.

We’ve produced a case study based on the nil income option and other support material, such as client brochures are also available on the Adviser Centre.

Regards,

David
David Pope, Distribution Director, Individual Retirement