Alternatively Secured Annuity

If clients have not already taken an annuity, when they reach 75 they are more limited in their options to choosing between taking an annuity or using an “alternatively secured pension”. An alternatively secured pension allows their pension to remain invested yet they remain able to “draw” an income from it, however it does have several limitations attached to it as to how much they can draw.

Annuity

An annuity is a financial product that is bought with a pension fund and provides an income guaranteed to be paid for the rest of a client’s life. The amount of annuity they receive depends upon a number of factors including the size of their pension fund, age, gender, health, and the additional benefits that they choose to include in the annuity.

Annuity Protection

See Value Protection

Benchmark Interest Rate

Interest rate based on the Financial Times UK Gilts 15 Year Yield Index

Cash Advance(s)

Any amounts advanced to planholders under the Equity Release Plan

Cash Facility

The amount guaranteed to be available to planholders in excess of their Initial Cash Advance for the life of their Plan, subject to certain exceptional circumstances

Conventional annuity

A conventional annuity provides an income guaranteed to be paid for the rest of a client’s life. The income is not subject to investment risk, so no matter what happens to stock markets, house prices or any other investments, and even if they live to be the oldest person in the world, income from a conventional annuity will continue to be paid out. The security that a conventional annuity offers suits most people and so conventional annuities are the most popular retirement income product.

Defined Benefit pension (also known as a final salary scheme)

With this type of pension, the amount of retirement income an employee gets is set in advance. The amount of income they get is based on the number of years they have worked for their employer and their salary.

Defined Contribution pension (also known as a money purchase scheme)

This is a term given to pensions which clients contribute into, and can be either a personal pension or an occupational pension. As an occupational defined contribution pension - into which their employer, and often an employee, agree to pay a set amount into their pension fund. While they are still working, the amounts they and their employer pay into the pension fund are set. The value of the pension fund at the time they plan to retire is not set and may carry investment risk.

Dependant

Someone who is financially dependent on a client, typically a partner. Providers often require proof such as a joint utility bill or mortgage/bank statement.

Dependant’s Pension / Annuity

Also called “Joint Life Annuity” - In the event of death, a client’s annuity income may continue to be paid to a surviving spouse, civil partner or dependant if they have selected a joint life annuity. If they choose for their annuity to be paid to a dependant, this person may be asked to prove that they are financially dependent on them.

Drawdown

Ad hoc Cash Advances made to planholders from the Cash Facility they have been granted

Early Repayment Charge

A fee levied by Just Retirement in the event that planholders choose to repay the mortgage early.

Enhanced annuity

An enhanced annuity is an annuity that pays a higher income to a client if their habits (such as smoking), medical history or lifestyle may shorten life expectancy.

Equity Release

Equity release enables you to help your client to unlock money from their home while they still live there. They will not have to make any repayments until the property is sold either upon their death or when they move into care. An equity release plan can provide clients with access to cash lump sums, a regular income or both. To qualify for an equity release plan clients must be over a certain age (60 for Just Retirement’s products) and own their property.

Escalation / Inflation Linking

This describes the way in which an annuity income can grow each year - Clients may choose to have no increase (level) or increase their annuity each year at a fixed rate (say 3% per year) or in line with the change in a measure of inflation, such as the Retail Prices Index (RPI) for example.

Further Cash Advance

Cash Advances made to planholders either in excess of any Cash Facility they have been granted or in addition to their Initial Cash Advance, where no Cash Facility was given

Guarantee period

An annuity income is payable for as long as a client lives. If they die soon after purchasing an annuity, they may feel that they won’t have had the best value. They can therefore choose a minimum guarantee period (typically 5 or 10 years), which means that, if they die within that guarantee period, the annuity will continue to be paid for the remainder of that period. Clients can nominate anyone to receive the income from their guarantee either directly to the annuity provider or through their will.

Impaired annuity

An impaired life annuity is an annuity that pays an even higher income than an enhanced annuity for those who have significantly lower life expectancy due to an existing medical condition. Medical conditions such as heart attacks, heart surgery or angina, life threatening cancers, major organ diseases and other life threatening illnesses such as Parkinson's disease and strokes may be considered.

In advance/in arrears

Clients can choose whether their annuity payments start as soon as their annuity has been set up (in advance) or at the end of their chosen payment frequency (in arrears).

Initial Cash Advance

The amount advanced to planholders at inception of the plan.

Investment-linked annuity

The income payments from this type of annuity may fluctuate in value as they are linked to the performance of an investment fund (or funds). Income from an investment-linked annuity may have some guarantees attached to it so it's worth checking what these are and how these work. If investment returns are good, their annuity income payments may rise. If investment returns are poor, then annuity income payments may fall, so they are not without risk. Two types of investment linked annuity you may have heard of are the with-profits annuity and unit-linked annuity.

Joint Life Annuity (Also called dependant pension / annuity)

In the event of a client’s death, their annuity income may continue to be paid to a surviving spouse, civil partner or dependant if they have selected a joint life annuity. If they choose for their annuity to be paid to a dependant, this person may be asked to prove that they are financially dependent on the client.

Limited Price Index

The maximum amount that can be advanced against the property based on age, sex and status of youngest applicant and the property value. These factors are contained in tables and are subject to a maximum of £250,000.

Loan To Value Factor