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Click to edit Master subtitle style Creating Certainty in Uncertain Markets Bankhall March 2009 James Etheridge Business Development Manager
Creating certainty in uncertain markets The increasing importance of annuities in retirement planning
Agenda About Partnership The market environment Is the time right for clients to retire? Why NOW is the right time to enter the annuity market How can you secure investment income?
About Us Founded PAFS Specialist provider of financial services for people with ill health First to introduce impaired life annuities De-mutualised October 2005 as Partnership Assurance
What about the economy? Worst economic conditions for 60 years Banks being nationalised Iceland going bust 32% fall in FTSE, largest in history 0% interest rates – deflation etc. Biggest fraud in history Could be two years before come out of recession What does the future hold?
FTSE 100 – Fell by 32% in 2008
Bank Base Rate at all time low Source: Bank of England Base Rate
Retirement Options – Market shape Illustrative purposes only - Based on ABI figures for 2008 ASPASP
Bond yield spreads Gilt Yields v A grade Corporate Bonds and Bank Base Rate
Why Annuities? Guaranteed income for Life Spouse protection Value protection Guaranteed Periods Escalation Lock in real value / Return on your Investment
Buy now or defer? Pension funds are experiencing a downturn Should your clients wait for markets and their pension funds to recover? How long should they wait?
Why defer? Markets start to recover lost ground Interest rates or bond yields go up giving better annuity rates How long will this take? How much annuity income will your client lose? How long can your client keep working?
Impact of deferring Age 65Age 66 Fund Value£ /+ 6% growth-£47000£53000 Annuity income£4261£4122£4655 Annual Increase by deferring -(£139)£394 Years to recover lost income --10 Based on: A male smoker £50,000 fund after tax-free cash Partnership Enhanced Annuity rates as at 19 Feb 2009
Question Do you agree that there is a case for annuitising now? 1 Yes 2 No
Wealth Management Should IFAs go into the annuity market now? What potential does this market have?
Client Awareness at Retirement Open Market Option – FSA determined that compulsory ‘Wake up’ packs are sent by all ceding companies to people approaching retirement Increasing pressure from TCF perspective to ensure clients get the best available rate Treasury Pre-Budget Report on OMO due in March 2009 Should improve the current ABI statistics that show only 35% people retiring take Open Market Options
YouGov Research Amongst 55+ age group: 79% didn’t know what an annuity was 61% had never heard of OMO Reasons why respondents didn’t take OMO: –49% were not aware of it –19% no financial benefit –11% not relevant to me –5% too confusing –16% other 78% of people taking OMO were ABC1 YouGov retirement survey July 2007
* Using Mintel’s All Items autodeflator Source: ABI/Mintel New Pension Annuities £ Billions Thousands
Estimated future retirement market figures At retirement pension transactions Source: Watson Wyatt “In retirement Study” March 2008 Future Growth
Maximise client income Normal annuities are based on age so how can you get better annuity rates for your clients? By considering their lifestyle and health: –Lifestyle/Smoker –Enhanced –Impaired
Why Enhanced? Estimates show that 40% of people could qualify for enhanced rates Only 10% of retirees purchase enhanced or impaired annuities Britain’s retirees are missing out on £1.25b in pension benefits every year Source: Life Assurance & Pensions Handbook 2007 P24 point 7.12
Enhanced/impaired life annuities as percentage of total sold Source: ABI/Mintel Annuity trends Number %
Case Study Rod is 65, single and suffers from chronic heart failure He has a fund of £50,000 after tax-free cash and he decides on a single life annuity with a five-year guarantee Standard Annuity £ Partnership Enhanced Annuity £ This data is for illustration purposes only comparing enhanced annuity rates with standard annuity rates. The benefits stated are correct as at 07 Jan Standard rates are average rates of the top 4 providers, taken from The Exchange. Other rates are from Partnership. Annual Increase In income 33% or £
Case Study Doris is single, 67, female and a smoker She has a fund of £50,000 after tax-free cash opted for no guarantees Standard Rate £ Smoker Rate £ Annual Increase In income 21% or £ This data is for illustration purposes only comparing smoker annuity rates with standard annuity rates. The benefits stated are correct as at 07 Jan Standard rates are average rates of the top 4 providers, taken from The Exchange. Other rates are from Partnership.
Case Study Thomas and Mary are married, Thomas is 66 with diabetes, Mary is 63 with high blood pressure Joint life £50, % spouse Standard Annuity £ Partnership Enhanced Annuity £ Annual Increase In income 12% or £ This data is for illustration purposes only comparing enhanced annuity rates with standard annuity rates.The benefits stated are correct as at 07 Jan Standard rates are average rates of the top 4 providers, taken from The Exchange. Other rates are from Partnership.
Question Do you appreciate the importance of asking your clients about their lifestyle and health? 1 Yes 2 No
Common Quote Form One form agreed by all providers Meets TCF requirements Compliance officers love it Ease of administration Form available from our website or Customer will get a better rate and the IFA has to do less work!
The case for Purchase Life Annuities Investment Bonds for income ? FTSE lost 30% in 2008 Interest rates at all time low What return are your clients getting on their investments? Is the risk / reward level suitable for retired clients?
PLA Sales Source: ABI data
Wealth Management - With Tax Free Cash ? Purchase Life Annuities as part of the investment portfolio PLA will give a guaranteed income Enhanced / Impaired
Purchase Life Annuity Purchase life annuities as part of the investment portfolio? – Guaranteed rate of return for life – Impressive yields – Income and Inheritance tax benefits PLA (Gross Annual Annuity Figure) Male Age 60Female Age 60Male Age 70Female Age 70 Smoker£5, (5.85%)£5, (5.58%)£7, (7.75%)£7, (7.42%) Moderate£7, (7.7%)£ (7.02%)£10, (10.57%)£9, (9.21%) Severe£16, (16.00%)£16, (16.08%)£21, (21.90%)£21, (21.75%) Please note: This data is for illustrative purposes only. Based on £100,000 initial investment income payments annually in advance. Rates as at 28/01/09. examples do not take into account inflation. Income payments from a PLA can be escalated to help mitigate the effects of inflation. The percentage figures shown in brackets represent the annual gross rate of return provided by the initial investment. If the client does not live for long the purchase price of the annuity would be lost, however guarantee periods can be used to mitigate this loss of capital.
Question Will you now consider PLA’s as part of an investment portfolio? 1 Yes 2 No
Summary Annuities provide certainty in uncertain times Now is the time to purchase Enhanced annuities are a genuine opportunity to maximise client income 40% of clients could get more It’s easy to get a quote Consider PLA’s as an alternative investment vehicle Don’t forget the ‘health’ question!
GET BETTER ANNUITY RATES FOR YOUR CLIENTS IN 2009… AND YOU COULD DRIVE AWAY A BRAND NEW MINI* Partnership is one of the UK’s market leaders in providing financial solutions for people whose health and lifestyle may result in a reduced life expectancy. And it’s a fact that up to 40% of your clients could receive more money in retirement by answering a few simple questions about their health and lifestyle. We cover everyone from smokers and people with everyday conditions like hypertension – right through to those with serious illnesses such as heart disease. And we make sure that our solutions are tailored to match your clients’ circumstances. Your clients could enjoy happier, wealthier retirements and you could drive away a brand new Mini*. To enter, simply log in or register at and every time you request an illustration you’ll be entered into our free prize draw to win yourself a brand new mini.log inregisterwww.partnership.co.uk/adviser * Please read the Terms & Conditions that apply. Closing date for entries is 30/04/09. Promotion open to IFAs only - not open to general public. All entrants must: (a) be resident and registered as an IFA in Great Britain, (b) be aged 18 or over, and (c) hold a full UK driver's licence. Prize is one Mini One car (excludes insurance). To enter this free prize draw simply request an illustration on the Partnership website and you'll automatically be entered for the prize draw. The promoter is Partnership, Sackville House, Fenchurch Street, London EC3M 6BN. Further terms apply. Visit https://www.partnership.co.uk/adviser for full terms & conditions
Question Going forward will you regularly use the common quotation form ? 1 Yes 2 No
Name: James Etheridge Business Development Manager * Please note that the comments and views presented by the media clips are not representative of the views of Partnership or any member of staff of Partnership. The Mini shown in the media clip is not representative of the actual prize, for full details of the competition please refer to the terms and conditions on our website. Partnership is a trading style of The Partnership Group of Companies, which includes: Partnership Life Assurance Company Limited (registered in England and Wales No ), and Partnership Home Loans Limited (registered in England and Wales No ). Both companies are authorised and regulated by the Financial Services Authority. The registered office for both companies is Sackville House, Fenchurch Street, London EC3M 6BN.