21st March 2014
Pension firm Hargreaves Lansdown has put out the latest list of those annuity firms which have extended the cooling off period for annuities and those that haven’t changed or at least not as yet. The move comes amid reports that life offices have been inundated with inquiries about annuities with thousands of potential annuitants wishing to think again.
It has also issued a note on the options for those near retirement or engaged in the annuitisation process.
Tom McPhail, Head of Pensions Research “If in doubt, investors should review their current retirement income plans. For many people an annuity will still be the right answer however we expect insurance companies to be forced to work a bit harder for investors’ money. Drawdown offers a useful short term option to pay out some income if needed at retirement while investors work out what to do next.”
Already retired with an annuity
If you are already in an annuity and have gone past the cancellation period (usually 30 days) then the budget changes won’t give you any options to change this arrangement.
Already retired in Drawdown
If you are in drawdown then you may want to be contacting your drawdown provider to find out whether they are going to be able to adapt their systems to accommodate the new 150% income limit. You can request a review of your income limits on your policy anniversary but that is dependent on your drawdown provider being able to meet your request.
You may have decided to buy an annuity. If you shopped around, you’re satisfied that is right answer and that you’ve got the best deal you can, including an enhancement where applicable then there is no reason to change your decision.
If you’re buying an annuity, you’re still happy that you don’t want to deal with the uncertainty of investment risk and life expectancy but you haven’t shopped around then you may still want to buy an annuity but make sure you do your research first. If you have completed an annuity application already but you’re still in the cancellation period, you can still unwind it, but only do this if you feel that your original decision is not now the right one.
If you aren’t sure what to do but you need to start drawing an income, you can always go into drawdown as an interim measure while you work out your options. Be aware though, that your investments could go down in value while you are in drawdown.
|Annuity provider||Usual cancellation rights||What’s changed since the budget|
|Aviva||30 days from the date the application was signed||Now 30 days from when the policy has been set up instead of when the application was signed|
|Canada Life||30 days after policy document issued||No change|
|Hodge Lifetime||30 days from the date the application was signed||No change|
|Just Retirement||30 days from date the client received their right to cancel (issued with application form)||No change|
|Legal & General||30 days from the date the application was signed||No change|
|LV=||30 days from the date LV= receive the completed application||Extended to 60 days from the date LV= receive the completed application – this is for customers currently within their existing 30 day cancellation period and for new customers who apply for an annuity in the next month|
|MGM Advantage||30 days after policy document issued||Extended to 60 days after policy document issued|
|Partnership||30 days after they receive a confirmation letter (posted to the client when Partnership processes the application).||Extended to 11 April 2014 (if current cancellation rights were beyond 11 April then the standard 30 days still applies)|
|Prudential||30 days from when they receive their first Prudential quote.||No change|
|Standard Life||30 days after policy document issued||No change|