The Annuity Growth Account is a new type of annuity which uses a 5 year temporary annuity to provide a guaranteed income whilst part of the pension remains invested until the temporary annuity runs out.
Part of the AGA is invested in a 5 year temporary annuity. This is an
annuity which only pays out for 5 years after which it stops
Temporary annuities cost less than lifetime annuities because the payout period is shorter.
The amount invested in the temporary annuity depends on age and the level of income required
The balance of the pension remains invested in a personal pension.
There is a wide range of funds in which to invest and they enjoy the normal tax advantages
At the end of the 5 year period the pension fund should have increased in value and part will be used to buy another temporary annuity.
It is important to understand that the AGA is an annuity - an exchange of capital for income - and so on death there is no lump sum death benefit
On death the balance of the fund which is not used to provide death benefits (see below), goes towards the mortality cross subsidy for other annuitants
However to compensate for exchanging capital for income, the AGA pays a special
survivor bonuses at the end of each 5 year period. This is a very transparent
way of passing on the benefits of mortality cross subsidy
The AGA can payout death benefits in two ways
You can choose to have a partner's pension of 50%, 2/3rds or 100%. On
your death, and at the end of the temporary annuity, your partner will
be able to use the selected proportion of the fund (50% 2/3rds or 100%)
The Flexible Lifetime Annuity is an annuity, but an annuity with a difference. Whilst retaining the unique guarantee of an 'income for life' which is associated with traditional annuities, the FLA gives you flexibility and control over your income. With FLA you have:
FLA allows you change the level of your income, within prescribed limits,
when the need arises.
Also your income can remain constant, even if the value of your investments
are going up and down.
This overcomes one of the biggest problems with unit linked annuities
where income can fluctuate from month to month.
FLA can be invested in a wide range of managed pension funds.
There are three preselected investment strategies, which provide the investment
mix appropriate to the chosen level of risk
The ability to invest in equities but receive a stable income,
is an important advantage
With the FLA you have a certain amount of control over the death options.
Compare this to the death benefits under a standard annuity where you
have no control at all. There are two ways in which you can tailor the
death benefits under a FLA.
This website is run by William Burrows, is for information only and does not provide specific financial advice.