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Life And Legacy

ARTICLE BY

  • Tom Crotty
  • Head of Risk Optimisation and Product House Integration
  • Liberty

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One of the most important financial decisions any client can make is their choice of retirement vehicle for receiving an income through their retirement. This often involves choosing between either a life annuity or a living annuity upon retirement.

While a living annuity offers a broad degree of financial flexibility with the retiree taking on the investment risk, a life annuity offers more certainty in that it pays consistently while the client is living, guaranteeing an income until death – and this remains its major attraction for clients looking for income certainty.

A careful choice

With life annuities, clients have to make an extraordinary once in a lifetime decision to hand over their retirement savings to a service provider, and most likely this amount is more than they have ever seen in their entire lives. It is, for most, their career savings all in one lump sum.

It is here that the adviser is often faced with many questions from the client. For example, many clients fear that if they were to pass away for any reason soon after this commitment, that their money would have been wasted.

There are so many unknowns at this point. No one knows how long they will live into retirement and how long their income needs to last.

Some solutions in the market do offer a life insurance package which effectively allows capital to be passed on, but often this comes with complications like medical exams and a lack of flexibility with the insurance payments over time.

Life annuity or living annuity

Life annuities are increasingly popular in today’s market because they offer a guaranteed stable income for life, so that a person’s retirement can be all that they want it to be.

The advantage of these annuities is that their income is unaffected by market volatility or investment returns. They will pay out as long as the individual lives, irrespective of how long this may be. However, once the retiree passes, no funds are inherited by dependents, unlike a living annuity which pays out any remaining retirement funds.

This would be dependent on how long the individual drew an income and how well stocked the pot of money was through retirement. The advantage of a living annuity is that the client benefits from strong market performance as it grows the underlying capital from which an income is drawn.

Combining two solutions in one net income

With all of this in mind, Liberty offers clients the ability to use its life annuity with Capital Protection solution. This allows retirees to earn a consistent and known income through retirement and leave an inheritance, through a life cover policy.

Liberty’s solution combines its life annuity offering with its Lifestyle Protector Life Cover benefit. The life annuity offers a guaranteed income until the client passes and the life cover ensures that there is a payout to dependants. This solution ensures an income in retirement and a legacy that lasts. However, it differs from other solutions in the market in that it has simplicity and flexibility built into it from the start.

The LACP solution gives a person the ability to structure a guaranteed income through a life annuity, but allows them to specify an amount to be paid to their beneficiaries upon their passing. This can be any amount up to the size of the life annuity capital value.

No medical tests, guaranteed life cover premiums and flexible cover

With this Liberty solution, clients have guaranteed access to life cover, with no additional health questions or medical tests, and the certainty that there will be no unexpected increases to their life cover premiums over time.

Unlike many other products on the market, with Liberty’s LACP offering, clients can choose the size of life cover they want to pass on at the start of their retirement. However, they have flexibility in that they can reduce their life cover amount at any time after inception if their legacy, protection or income needs to change over time.

An annuity designed for living

The options have been designed so clients have the ability to reduce or even terminate the life cover portion if they choose, giving them the freedom to manage their retirement finances as their needs require.

Clients can also select a level income or escalating annuity income which matches the demands of inflation.

With this LACP package Liberty wants to offer people embarking on their retirement journey the long-term certainty of a life annuity, the ability to leave a legacy, combined with simplicity and flexibility so they can live the lives they want without having to worry about restrictive rules that limit their options in retirement.

The added life protection policy allows clients to leave a legacy behind, but in a way that it never becomes a burden on them in terms of never having to submit to underwriting, and having the option to change the life insured amounts over time.

Retirement should be a time of pleasure, discovery and relaxation. Now clients can enjoy the type of lifestyle they deserve and still be able to leave a legacy behind.

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