a compromise crystallisation for a pension fund?

kidmugsy

Would this thing be any good for someone who wants to avoid the constrictions of a conventional annuity, but also doesn't want to manage his own pension fund in drawdown?

http://citywire.co.uk/money/guaranteed-income-and-money-back-the-annuity-offering-it-all/a776459?ref=citywire-money-latest-news-list

Your_Hero

Nice article, though a value-protected annuity is not quite a half-way house between annuities and drawdown, as the fund is still "lost" and you can't change the income or benefit from future fund growth.

Only real benefit in light of the proposed changes is the abolishment of the 55% charge on annuities too, which was different to what was originally proposed (only applied to drawdown).

bmm78

I think it's definitely a viable option, but for people concerned about not getting their "money back" rather than people looking for a halfway-house option.

Some providers are pricing it very competitively in relation to guarantee periods/spouses benefits, and are looking at this as a potential growth area.

Personally I think there will be a significant increase in value protection in the 30-60k market, once the smoke clears. One of their biggest (rational) concerns they have about annuities is that if they die early they may not get the fund back, even with guarantee periods and spousal benefits. The irrational barrier is that many people have been turned off annuities due to the perception of them as "bad" products. For example, some providers/brokers have noticed an increase in sales of fixed term annuities since they stopped calling them "fixed term annuities". Perception plays a massive part in buying decisions for these people.

Making sweeping generalisations admittedly, but the 30-60k market is a different animal from the type who is currently making good use of drawdown. Invested drawdown isn't, and never will be suitable for the bulk of these people, who have little active investment experience, and equally little willingness to do their own research and monitor their own investments.

Just my opinion, but the 30-60k market is looking for a "better annuity" rather than full drawdown. Value-Protected annuities, marketed and positioned correctly, may be one of the products to fill that gap.