Fixed Term Annuities A Smith | LV= Key Account Manager DATE For
financial advisers only Not for use with customers
Slide 2
2 At-retirement market landscape Giving clients more options in
retirement: The case for Fixed Term Annuities Fact and Fiction:
Bringing clarity to Fixed Term Annuities LV= Fixed Term Annuity
product overview Case studies and sales opportunities Agenda 2
Slide 3
Fixed Term Annuities The At-Retirement market landscape 3 For
financial advisers only Not for use with customers
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4 At-Retirement market landscape Overview: annuity -vs-
drawdown Illustrative only, not to scaleSource : ABI. New business
stats 2012 (12 months) 12% 10 % 78%
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5 At-Retirement market landscape Rise of the middle market
Lifetime AnnuitiesEnhanced AnnuitiesDrawdown Middle Market
Illustrative only, not to scale Flexible Annuities Fixed Term
Annuities Variable Annuities With Profit Annuities Investment
Linked Annuities
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Longevity Attitudes Working patterns 6 At-Retirement market
landscape Retirement its not what it used to be
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7 At-Retirement market landscape Longevity life expectancy at
age 65 20 17 17.8 20.4 Source: ONS Health Expectancies at Birth and
at age 65 in the UK, 2008-2010 Years 50 years ago
Slide 8
8 At-Retirement market landscape Changing needs and attitudes
Sources: National Association of Pension Funds, Bank of England,
Primetime Retirement the amount 1 in 4 people aged 50-64 will need
to save before retirement to get the income they expect percentage
of people entering retirement with unsecured debt 24% pay-day
lenders.com
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9 At-Retirement market landscape Changing working patterns
Source: LV= Working Late Index, 2012 people aged 50+ who had
retired but since returned to work EXIT > 4.3m the average
number of years people expect to have to work beyond State
Retirement Age (men expect to work longer) Years 6.2 Average Female
Male
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Fixed Term Annuities Giving clients more options in retirement
10 For financial advisers only Not for use with customers
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In an ideal world: Many clients would want GUARANTEES and
CERTAINTY CHOICE and CONTROL Can they have it all? 11 Giving
clients more options in retirement The case for Fixed Term
Annuities
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12 Giving clients more options in retirement The case for Fixed
Term Annuities A lifetime income BUT...a lifetime lock-in Roughly
90% of people buy a Lifetime Annuity when they retire BUT What if
health changes? What if rates change?What if circumstances
change?
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13 Giving clients more options in retirement The case for Fixed
Term Annuities A lifetime income BUT...a lifetime lock-in Roughly
90% of people buy a Lifetime Annuity when they retire BUT Could a
Fixed Term Annuity be the answer? What if health changes? What if
rates change?What if circumstances change?
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A Fixed Term Annuity gives: CONTROL, with a GUARANTEED outcome
CONTROL of death benefits Future CHOICE CERTAINTY Giving clients
more options in retirement The case for Fixed Term Annuities
14
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15 Fixed Term Annuities How do they work? Pension Fund PCLS Or
transfer from existing Drawdown (Not OMO) Fixed Term (typically
3-25 years) Guaranteed Maturity Lump sum Regular income, e.g.:
Monthly in arrears/advance etc Escalation options available Annuity
product Drawdown product
Slide 16
Annuity product Drawdown product 16 Fixed Term Annuities How do
they work? Pension Fund PCLS Or transfer from existing Drawdown
(Not OMO) Fixed Term (3-25 years) Maturity lump sum Regular,
income, e.g.: Monthly in arrears/advance etc Escalation options
available Maturity lump sum is known from outset and not subject to
investment performance risk
Slide 17
Income Maturity 0Max MinMax Fixed Term Annuities How do they
work? 17 The higher the income chosen at outset, the lower the
maturity value annuities
Slide 18
Fixed Term Annuities How do they work? 18 Income Maturity 0Max
MinMax The higher the income chosen at outset, the lower the
maturity value and vice versa
Slide 19
Fixed Term Annuities How do they work? 19 Income Maturity 0Max
MinMax The higher the income chosen at outset, the lower the
maturity value and vice versa Income and Maturity Lump Sum will
also be affected by term and any death benefit options
selected
Slide 20
Lifetime Annuity: Future annuity rates may be higher Health may
get worse but no way to access enhanced rates Circumstances may
change but client is locked in to one shape of income Inflation can
eat away at fixed income Death benefit options are not as good as
Drawdown-style options Fixed Term Annuity: Future annuity rates may
be lower (so maturity value might not be able to sustain income)
GAD might restrict future income Enhanced rates might not be
available or may be lower in the future than today Does not provide
a guaranteed lifetime income 20 Risks
Slide 21
Fixed Term Annuities Fact and Fiction bringing clarity to Fixed
Term Annuities 21 For financial advisers only Not for use with
customers
Slide 22
A Fixed Term Annuity could benefit a client if: Annuity rates
go up in the future Their health gets worse in the future Their
circumstances change in the future (e.g. divorce, death of a
spouse) But by how much do these things have to change What does
the client have to believe Fact and Fiction Bringing clarity to
Fixed Term Annuities 22
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23 A data driven, evidence based illustrative analysis of the
potential for these products to deliver real value in a series of
different circumstances.
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24 Increases in gilt yields, assuming these translate into
improvements in annuity rates......could make purchasing a Fixed
Term Annuity a successful strategy for many people. Source: LV=
Fixed Term Annuity Fact and Fiction Report, 2012 Likelihood of a
Fixed Term Annuity (FTA) achieving economic equivalence or higher
compared to a Lifetime Annuity (LTA) given changes to annuity
pricing yields
Slide 25
25 Where there is a reasonable age gap between the applicant
and the spouse, or where the spouses pension is higher than 50%,
then, in many cases, the fixed term route could provide a higher
income Likelihood of a Fixed Term Annuity (FTA) achieving economic
equivalence or higher compared to a Lifetime Annuity (LTA) for
different combinations of age and level of benefit Source: LV=
Fixed Term Annuity Fact and Fiction Report, 2012
Slide 26
Deterioration in health during the Fixed Term can also lead to
a superior outcome...more serious conditions are likely to produce
a better financial outcome relative to a Lifetime Annuity. 26
Likelihood of a Fixed Term Annuity (FTA) achieving economic
equivalence or higher compared to a Lifetime Annuity (LTA) based on
a subsequent adverse medical diagnosis Source: LV= Fixed Term
Annuity Fact and Fiction Report, 2012
Slide 27
27 Fact and Fiction Comparison calculator A unique tool:
Comparison charts Customised scenarios Print/download graphs
Slide 28
Fixed Term Annuities LV= Product overview 28 For financial
advisers only Not for use with customers
Slide 29
Our Protected Retirement Plan offers: Terms of 3-25 yrs Income
options at outset Guaranteed Maturity Value at the end of the term
Choice of Death Benefits Flexible remuneration options PLUS Fixed
Term Annuities LV= Product overview 29
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Our Protected Retirement Plan also offers: 30 day quote
guarantee period. Rate Match facility Money Where Our Mouth Is PLUS
Fixed Term Annuities LV= Product overview 30
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Unique Flexible Drawdown option Maximise income IHT planning
Death benefit planning PLUS Fixed Term Annuities LV= Product
overview 31
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32
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HLE: Number of years spent in very good or good health Source:
ONS Health Expectancies at Birth and at age 65 in the UK, 2008-2010
33 Healthy Life Expectancy (HLE) at age 65 Males and females 20 17
10.1 10 11.7 11 8.7 Years 50 years ago 7.6
Slide 34
HLE: Number of years spent in very good or good health Source:
ONS Health Expectancies at Birth and at age 65 in the UK, 2008-2010
34 Healthy Life Expectancy (HLE) at age 65 Males and females 20 17
10.1 10 11.7 11 8.7 Years 50 years ago 7.6 Your clients could spend
up to half of their retirement in poor/ill health
Slide 35
Income continues to be paid to spouse/partner or dependant at
the specified rate At end of the term, they receive same %age of
GMV Provides lump sum (initial investment less income paid)
Spouse/partner could use to buy income in their own right Client
can leave the contract early if spouse/partner or financial
dependant dies Could use fund to buy single life annuity Remaining
income paid as a lump sum* If in combination with Dependants
Benefit, income is paid for remaining period of the guarantee 35
LV= Fixed Term Annuity Death Benefit Options Overview Break Clause
Value Protection Dependants Benefit Shared Appreciation Guarantee
Period 12 34
Slide 36
Income continues to be paid to spouse/partner or dependant at
the specified rate At end of the term, they receive same %age of
GMV Provides lump sum (initial investment less income paid)
Spouse/partner could use to buy income in their own right Remaining
income paid as a lump sum* If in combination with Dependants
Benefit, income is paid for remaining period of the guarantee 36
LV= Fixed Term Annuity Death Benefit Options Overview Client can
leave the contract early if spouse/partner or financial dependant
dies Could use fund to buy single life annuity Break Clause Value
Protection Dependants Benefit Shared Appreciation Guarantee Period
12 34
Slide 37
Income continues to be paid to spouse/partner or dependant at
the specified rate At end of the term, they receive same %age of
GMV Client can leave the contract early if spouse/partner or
financial dependant dies Could use fund to buy single life annuity
Remaining income paid as a lump sum* If in combination with
Dependants Benefit, income is paid for remaining period of the
guarantee 37 LV= Fixed Term Annuity Death Benefit Options Overview
Provides lump sum (initial investment less income paid)
Spouse/partner could use to buy income in their own right Break
Clause Value Protection Dependants Benefit Shared Appreciation
Guarantee Period 12 34
Slide 38
Provides lump sum (initial investment less income paid)
Spouse/partner could use to buy income in their own right Client
can leave the contract early if spouse/partner or financial
dependant dies Could use fund to buy single life annuity Remaining
income paid as a lump sum* If in combination with Dependants
Benefit, income is paid for remaining period of the guarantee 38
LV= Fixed Term Annuity Death Benefit Options Overview Income
continues to be paid to spouse/partner or dependant at the
specified rate At end of the term, they receive same %age of GMV
Break Clause Value Protection Dependants Benefit Shared
Appreciation Guarantee Period 12 34
Slide 39
Income continues to be paid to spouse/partner or dependant at
the specified rate At end of the term, they receive same %age of
GMV Provides lump sum (initial investment less income paid)
Spouse/partner could use to buy income in their own right Client
can leave the contract early if spouse/partner or financial
dependant dies Could use fund to buy single life annuity 39 LV=
Fixed Term Annuity Death Benefit Options Overview Remaining income
paid as a lump sum* If in combination with Dependants Benefit,
income is paid for remaining period of the guarantee Break Clause
Value Protection Dependants Benefit Shared Appreciation Guarantee
Period 12 34
Slide 40
40 LV= Fixed Term Annuity Death Benefit Options Value
Protection Death of client Lump sum death benefit: Net investment
Income taken Fund Term What happens next? Beneficiary can choose:
Lump sum death benefit (less tax, currently 55%) Annuity purchase
(potentially an enhanced annuity if health has deteriorated) Fixed
Term Annuity/Drawdown
Slide 41
41 LV= Fixed Term Annuity Death Benefit Options Dependants
Benefit Death of client What happens next? At maturity, Dependant
receives maturity lump sum and can purchase an income: Based on
their age at that point Based on annuity rates/gilt yields at
maturity Potentially an enhanced annuity if health has deteriorated
Lump sum death benefit: None, plan runs to maturity with income
recalculated based on Dependants age, rates and fund value Fund
Term
Slide 42
42 LV= Fixed Term Annuity Death Benefit Options Guaranteed
Period Death of client What happens next? Beneficiary can use the
lump sum for any purpose Lump sum death benefit: Balance of unpaid
income, less tax (currently 55%) Fund Term
Slide 43
Fixed Term Annuities Case studies and sales opportunities 43
For financial advisers only Not for use with customers
Slide 44
Who might FTAs be suitable for? Healthy retirees Nearly healthy
(minor enhancements) Those averse to investment risk Those who dont
need an income right now Those who are retiring in stages (e.g.
part-time employment) Those looking to preserve wealth Those wary
of lifetime lock-in 44 Fixed Term Annuities (FTAs) Case studies and
sales opportunities
Slide 45
Mr Jones Aged 60 and single Currently slightly overweight and
high blood pressure Looking to bridge income up to State Retirement
Age to reduce working hours No dependants so chooses to take no
death benefits to maximise Guaranteed Maturity Value 45 Fixed Term
Annuities Case study 1 Client case study PDF available from
www.lv.com/adviser
Slide 46
At maturity is diagnosed with worsening blood pressure and
angina and qualifies for an enhanced annuity. Mr Jones Aged 60 and
single Currently slightly overweight and high blood pressure
Looking to bridge income up to State Retirement Age to reduce
working hours No dependants so chooses to take no death benefits to
maximise Guaranteed Maturity Value 46 Fixed Term Annuities Case
study 1 Client case study PDF available from
www.lv.com/adviser
Slide 47
47 Fixed Term Annuities Case study 2 Mr Shah Aged 74 and now
widowed Has secure pension income to meet the Minimum Income
Requirement for Flexible Drawdown, including dependants income from
late wifes pension Has 100,000 un-crystallised pension fund Takes
25,000 tax free cash and buys a PRP with a Nil Maturity Value over
a 3 year term Tax depends on individual circumstances and is
subject to change
Slide 48
Client case study PDF available from www.lv.com/adviser He is
able to gift monies to his children: 7 year Potentially Exempt
Transfers 40% potential IHT v 55% lump sum death tax. 48 Fixed Term
Annuities Case study 2 Mr Shah Aged 74 and now widowed Has secure
pension income to meet the Minimum Income Requirement for Flexible
Drawdown, including dependants income from late wifes pension Has
100,000 un-crystallised pension fund Takes 25,000 tax free cash and
buys a PRP with a Nil Maturity Value over a 3 year term Tax depends
on individual circumstances and is subject to change
Slide 49
Mr & Mrs Ledger Married, both in early sixties Wife
diagnosed with cancer Wants to maximise income (at the expense of
Guaranteed Maturity Value) Wife dies during the term of the
Protected Retirement Plan Client case study PDF available from
www.lv.com/adviser 49 Fixed Term Annuities Case study 3
Slide 50
Mr & Mrs Ledger Married, both in early sixties Wife
diagnosed with cancer Wants to maximise income (at the expense of
Guaranteed Maturity Value) Wife dies during the term of the
Protected Retirement Plan Client able to use maturity value to meet
changed needs. Client case study PDF available from
www.lv.com/adviser 50 Fixed Term Annuities Case study 3
Slide 51
51 Fixed Term Annuity sales opportunities Client types to look
out for Those approaching retirement with uncrystallised funds
(esp. healthy) Those already in Drawdown (looking for an exit?)
Those who qualify for Flexible Drawdown Those looking for
flexibility with income (approaching retirement in stages) Those
with larger funds looking for a cocktail solution to spread
risk
Slide 52
52 Fixed Term Annuity sales opportunities Why should you
recommend the LV= PRP? allowing you to plan your customers
retirement income provision more effectively.
Slide 53
53 Fixed Term Annuity sales opportunities Why should you
recommend the LV= PRP? allowing you to plan your customers
retirement income provision more effectively. broadening your
competitive and propositional advantage over those adviser firms
offering only traditional lifetime annuities and retirement
solutions.
Slide 54
54 Fixed Term Annuity sales opportunities Why should you
recommend the LV= PRP? allowing you to plan your customers
retirement income provision more effectively. broadening your
competitive and propositional advantage over those adviser firms
offering only traditional lifetime annuities and retirement
solutions. supporting Treating Customers Fairly principles and
highlighting all available options.
Slide 55
55 Fixed Term Annuity sales opportunities Why should you
recommend the LV= PRP? allowing you to plan your customers
retirement income provision more effectively. broadening your
competitive and propositional advantage over those adviser firms
offering only traditional lifetime annuities and retirement
solutions. supporting Treating Customers Fairly principles and
highlighting all available options. providing opportunity for
further advice (and remuneration) when the plan matures, based on
client situation at that time.
Slide 56
56 Fixed Term Annuity sales opportunities Why should you
recommend the LV= PRP? allowing you to plan your customers
retirement income provision more effectively. broadening your
competitive and propositional advantage over those adviser firms
offering only traditional lifetime annuities and retirement
solutions. supporting Treating Customers Fairly principles and
highlighting all available options. providing opportunity for
further advice (and remuneration) when the plan matures, based on
client situation at that time.. enabling a continued customer
relationship and greater embedded value for your business.
Slide 57
57 Fixed Term Annuity sales opportunities Why should you
recommend the LV= PRP? allowing you to plan your customers
retirement income provision more effectively. broadening your
competitive and propositional advantage over those adviser firms
offering only traditional lifetime annuities and retirement
solutions. supporting Treating Customers Fairly principles and
highlighting all available options. providing opportunity for
further advice (and remuneration) when the plan matures, based on
client situation at that time.. enabling a continued customer
relationship and greater embedded value for your business. offering
transparent charging, factory gate pricing and remuneration
flexibility.
Slide 58
58 Fixed Term Annuity sales opportunities Why should you
recommend the LV= PRP? allowing you to plan your customers
retirement income provision more effectively. broadening your
competitive and propositional advantage over those adviser firms
offering only traditional lifetime annuities and retirement
solutions. supporting Treating Customers Fairly principles and
highlighting all available options. providing opportunity for
further advice (and remuneration) when the plan matures, based on
client situation at that time.. enabling a continued customer
relationship and greater embedded value for your business. offering
transparent charging, factory gate pricing and remuneration
flexibility. LV= gives you the full picture
Slide 59
59 Fixed Term Annuity sales opportunities Why should you
recommend the LV= PRP? A SIMPLE and FLEXIBLE alternative to a
Lifetime Annuity Lifetime Annuities no longer the default option A
new route to a potentially better financial outcome in
retirement
Slide 60
Midlands and South West:0800 678 1680 North: 0800 678 1682
South East: 0800 678 1681 Or Central quotes team:0800 169 1111 or
email them [email protected] You can access and download a full
range of Protected Retirement Plan documents and guides at
www.LV.com/adviser Opening times 8.30am 5.30pm Monday to Friday.
For textphone dial 18001 first. We may record and/or monitor your
calls for training and audit purposes. 60 To find out more
Slide 61
This is for financial advisers only Not to be used after 30
June 2013 This presentation is based on our understanding of
current and proposed legislation as at March 2013 applicable in
England and Wales and HM Revenue & Customs practice which may
change in the future. We cannot accept responsibility for any
action arising as a result of the information contained in this
presentation. Liverpool Victoria Friendly Society Limited, Keynes
House Tilehouse Street, Hitchin, Herts, SG5 2DX. Liverpool Victoria
Friendly Society Limited is a member of the ABI, AFM and ILAG.
Authorised and regulated by the Financial Services Authority,
register number. 110035. NM Pensions Trustees Limited, (registered
in England No. 4299742), act as Trustees and Scheme Administrators.
Authorised and regulated by the Financial Services Authority,
register number. 463402. Registered address for all companies:
County Gates, Bournemouth BH1 2NF. Tel: 01202 292333. 21332938
04/13 Important notes 61