'Life Trust annuity plays to longer living, wealthy retirees'

New Model Adviser, 14th January 2008, by Colin McClelland.

'Newly formed company Life Trust has launched an annuity that aims to support people living increasingly longer by folding the gains made by fellow policyholders who die back into the scheme.

The Longevity Income Plan (LIP) backed by JPMorgan, the Royal Bank of Scotland and US hedge fund house DE Shaw will invest in nine funds and pay an increasing income for 20 years from age 75 or 80. Planholders must enrol at least 10 years before payouts can begin.

Life Trust is looking to market to affluent people concerned about how they will finance a retirement that continues to grow longer as average UK male life expectancy is set to hit 82.7 years by 2031. 'It's an important area of financial service that has not been addressed,' Life Trust chief executive Andy Briscoe said.

The LIP is to be offered through IFAs such as INPartnership, the Falcon Group, Bates and Sage in two formats: a 3% commission approach and a non-commission fee-based version.

Besides the returns from the funds used to pay the annuities, policyholders would benefit from the returns for fellow scheme members who had died, which are distributed among surviving members. Sales director Simon Burgess said this 'mortality uplift' could add about 2.5% a year beyond the fund returns...

...Money invested in the LIP will be held offshore the UK in Ireland, qualifying a proportion of the annuity payments as tax-free. It is treated for tax purposes as a purchased life annuity.'