Income for life?

We look at whether income-for-life retirement products are as good as they claim.
 
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01.Introduction

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If you and your spouse are both aged 65, there’s a 50/50 chance one of you will live till 94. This means the chances of running out of your savings during retirement are greater.

New retirement products have emerged that promise to pay you a set amount of “income” for the rest of your life. They have two components: an account-based pension and a lifetime income guarantee offered by a life insurer. You draw income from the account-based pension and pay a fee for the lifetime income guarantee. If your account runs out of money, the life insurer continues to pay you income until you die.

In principle these new products give retirees a sense of stability as the annual income from these products is set and will never decrease. However as well as the high fees charged by these products, there are also some limitations to them such as the amount you can draw down and the fact they do not automatically account for the effects of inflation.

 
 

 

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