Temporary annuity solutions are an increasingly attractive option as depressed gilt yields and high inflation continue to subdue annuity rates
Gallagher Employee Benefits
May 8 2012
FALLING annuity rates as a direct result of lower gilt yields and high inflation have led to a significant rise in clients arranging temporary annuities, according to new research by Gallagher Employee Benefits.
The retirement planning specialists’ Stuart Grennan said more and more clients were either taking up or considering taking up a temporary annuity option in order to put off annuitising for life in the currently poor market conditions.
“We believe that the take up of temporary annuities will continue well into 2012 and perhaps beyond, as we think it unlikely that annuity rates will rise anytime soon, as gilt values are likely to remain low given the current austerity measures and fall out from the EU-zone.
“Added to that we have EU legislation Solvency 2 looming, which will in all probability further dampen the chances of rates rising – so for those in or approaching retirement, there are many attractions to taking an annuity now with the option of moving to a different product a few years down the line when rates have hopefully improved,” he added.
A temporary annuity can be bought for a fixed period, usually with a minimum of five years and a maximum of the period until age 75 is reached.
“A temporary annuity allows people to avoid making a one-off decision, perhaps if they feel it is too soon into their retirement,” said Grennan.
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