UK - Annuities should include a money back guarantee, Prudential proposes in its response to the government's 'Modernising Annuities' consultation paper.
Prudential says that in return for a slightly lower annuity income individuals should be able to pass on a taxable lump sum on death.
Prudential annuities managing director Tom Boardman believes this change may allay many people’s major worry about buying an annuity: namely, that the pension fund they have saved hard to build is swallowed up by the insurance company if they die soon after its purchase.
Prudential proposes that a typical annuitant might see a 2% reduction in their annuity income in return for a money back guarantee, the cost though would depend on age and the type of annuity chosen. Boardman added: “The proposal is particularly attractive for RPI-linked annuities since the current 10 year guarantee would only result in some 55% of the fund being repaid to a 60 year old male who dies during the first 10 years.”
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