Coronavirus and market volatility


Kirsty Wright – Senior Proposition Manager

The huge stock markets falls of the past weeks, and the on-going volatility that looks to be here for some time to come, have worried many savers who are either approaching retirement, or drawing an income from their pension fund.

Most people at this stage of their life look for certainty and security and the prospect of drawing an income from a fund that is falling in value will be deeply concerning.

Although drawdown is hugely popular, savers in drawdown run the risk of running out of money in retirement. An alternative, which has become increasingly popular over the past few weeks, is a fixed term annuity.

At LV= we’ve seen a sharp rise in enquires for fixed term annuities. Application volumes have doubled over the last month compared to the monthly average seen over the previous three months.

A safe haven?

Amidst fears about Coronavirus and investment market turmoil, advisers and retirees alike are seeking out some security for retirement savings. Are fixed term annuities the safe haven they’re looking for?

They certainly add flexibility to decision making. A fixed term annuity may be a useful solution to consider in helping customers who like certainty and need to make decisions about their retirement but who aren’t ready or able to make long-term commitments. They can give cautious retirees an opportunity to ‘pause’ the big decisions and take a secure, guaranteed option whilst they consider their options and let the dust settle.

A fixed term annuity provides more flexibility than a standard annuity, often with rates that are better than standard cash accounts. It will provide guaranteed outcomes for a chosen period to suit the customer’s needs and can be used to provide either a guaranteed income, a guaranteed lump sum at maturity, or a combination of both. They appeal to customers who are looking for certainty in relation to their income or the outcome at the end of a term. In times of volatility, they can provide an effective stop-gap solution.

The LV= fixed term annuity currently has a minimum term starting at three years to provide flexibility for clients who are at or nearing retirement and are looking for a secure income and tax-free cash while they consider their options.

Whilst we continue to navigate our way through this storm fixed term annuities may well be a welcome opportunity to give both you and your clients' breathing space to consider the options whilst markets settle down.

Find out more on our fixed term annuity (Protected Retirement Plan) range by contacting your account manager.

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