Title: What is Living Time?
Author: Billy Burrows
Added on: 05/06/2008
Living Time provide a new type of annuity product called a Fixed Term annuity.
What is a Fixed Term Annuity?
A Fixed Term Annuity is a type of annuity written under Unsecured Pension (USP) rules. This means it can provide some of the benefits of both conventional income drawdown and traditional lifetime annuities.
Fixed Term Annuities provide a fixed income (subject to GAD limits) for a minimum of 5 years and up to a maximum of age 75.
If the client survives until the end of the term there will be a guaranteed maturity payout which can be reinvested in another Living Time Plan (if aged 70 or less), a drawdown plan (‘alternatively secured pension’ if past the age of 75) or an annuity.
The policy can be set up as a joint life policy and can also include a guaranteed income period or Value Protection, which returns a lump sum equal to the initial investment less gross income paid to the point of death (less tax if the money is not reinvested for income).
Who is behind Living Time?
Living Time was founded by Kim Lerche-Thomsen and a team with decades of experience in the retirement income market and a passion to modernise the industry. It is a new kind of financial services company for people reaching the end of their full-time working lives. In conjunction with AIG Life they have developed a new range of income products for life after work which allows clients to take a regular income with greater flexibility than traditional lifetime annuities.
How Living Time Plans Work
Living Time Plans allow clients to choose from a range of income and death benefit options now, as well as keeping their options open for longer because they are not locked in for life, unlike a traditional annuity.
The Plans include the following guarantees:
- Living Time Plans guarantee that a client’s income is secure, subject to Government income limits not being exceeded. If changes to Government limits mean that Living Time has to restrict income payments, any income they cannot pay will be added to the Guaranteed Maturity Amount, plus interest at a gilt rate of appropriate duration.
- The Plans guarantee to provide a predetermined maturity amount at the end of the Plan term (the Guaranteed Maturity Amount or GMA). Depending on the client’s age at that time, this amount can either be used to buy another Living Time Plan, a lifetime annuity from an annuity provider of their choice, or a further post-retirement pension product. Unfortunately, pension rules mean that they cannot take the cash!
- Should the client so choose, the Plans guarantee that their investment will not die with them. Their spouse / civil partner can receive an income or lump sum or it may be possible to provide a lump sum to a nominated beneficiary
The Advantages
If a client’s future circumstances change they have the flexibility to choose the appropriate options when their plan reaches maturity.
The client could potentially benefit from a higher income in the future if their health has worsened during the term of your Living Time Plan.
Living Time combines some of the advantages of annuities with some of the advantages of drawdown.
The Living Time 75 Plan and Living Time Income Plan are underwritten by AIG Life, part of AIG Inc, one of the world’s largest insurance companies.
The Risks
If the client dies before the end of the plan term, there will be no further income payable and the maturity amount will not be payable unless they have selected appropriate death benefit options.
The amount of annuity income you can secure at the end of the Plan term will be dependent upon annuity rates at that time, which may be better or worse than current rates.
Living Time Plans are NOT suitable for those who want the certainty of a guaranteed fixed income for the rest of their lives.
The Living Time 75 Plan
The 75 Plan pays a regular income until clients reach the age of 75. At this time AIG Life will pay a maturity amount which must be used to buy a lifetime annuity or 'alternatively secured pension' with a provider of their choice. If they die before you reach 75, AIG Life income payments will continue if appropriate death benefits had been selected. The Living Time 75 Plan provides:
- A regular income up to the age of 75, between nil and the maximum the Living Time 75 Plan allows (this is roughly equivalent to a comparable lifetime annuity set up with similar benefits). These amounts are within the minimum and maximum allowable by legislation
- A guaranteed maturity amount on the day before the client’s 75th birthday. This must be used to purchase an annuity or it can be invested in an ‘alternatively secured pension’.
- The client can choose a guaranteed death benefits from a minimum of £nil to a maximum of the return of their initial investment, less any income payments made before tax
The Living Time Income Plan
The Living Time Income Plan shares the same product features as the Living Time 75 Plan, but with greater flexibility. AIG Life still provides the client with an income and death benefits if required, as well as a Guaranteed Maturity Amount. These can be tailored to suit the client’s needs.
