UK - Projections on the returns of with-profit annuities are misleading and should be revised in accordance with current market conditions, warns The Annuity Bureau.
Currently, life offices inform clients that the standard projected bands of income to be earned on with-profit annuities are 5%, 7% or 9%.
But The Annuity Bureau thinks these illustrations are inflated and should be lowered to 3%, 5% and 7%.
This year, Prudential and Scottish Mutual declared a total bonus declaration of 3% on their with-profits annuities and Norwich Union declared 4% – all under the FSA’s current projection requirements.
The Annuity Bureau’s managing director, Peter Quinton said: “Purchasers of with-profits annuities are being mislead into believing that they will earn more from their investment than is realistic.
“With the market so low, I believe it is now a good time for imminent retirees to consider investment-linked annuities because the market is likely to rise over the duration of their retirement, which could be longer than 20 years.”
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