The marked improvement in annuity rates over the past 12 months has also had a positive impact on the cost of guarantees, according to Canada Life research.
In one example, the provider said the margin between no guarantee and a 20-year guarantee is just a 4% reduction in annual income, with a £100,000 annuity securing an income of £6,532 vs £6,270, a reduction of £262 a year.
The 20-year guarantee will return income of at least £125,400, irrespective of what happens to the customer.
Nick Flynn, retirement income director at Canada Life said: “No longer do clients need to trade off a big drop in income to provide valuable guarantees.
“The reduction in income from choosing a longer guarantee period which effectively provides a ‘money-back’ guarantee, is now so narrow as to cost peanuts, so it’s completely bonkers not to consider some guarantees to provide additional certainty.”
He added: “Now one of the biggest barriers to annuities, ‘I won’t get my money back if I die early’, can really be challenged and guaranteed periods need to be explored.”
How the costs compare – £100,000 purchase price
|
Guarantee period,
(to cover early death)
|
Annual Income, payable for life
|
Minimum Guaranteed income
|
Change in annual income to provide additional protection
|
|
None
|
£6,532
|
|
|
|
5 years
|
£6,522
|
£32,610
|
– £10
|
|
10 years
|
£6,489
|
£64,890
|
– £43
|
|
20 years
|
£6,270
|
£125,400
|
– £262
|
|
30 years
|
£5,879
|
£176,370
|
– £653
|
|
50% Value protection
|
£6,505
|
£50,000
|
– £27
|
|
100% Value protection
|
£6,388
|
£100,000
|
– £144
|
Source: Canada Life annuity rates as at 11/04/2023. Healthy life aged 65, average postcode
