The final DOL rule also eliminates two disclosure requirements that many felt would be overly burdensome, especially with respect to index-linked annuity
products: the requirement that advisors provide one-, five- and ten-year projections to clients and the annual disclosure requirement.
"Those who may have been tempted to buy a level annuity during recent times of low inflation, rather than an index-linked annuity
, may now see the value of their income being eroded by higher inflation," Richardson at Towry said.
However, for those buying pensions with their own funds, inflation protection comes at a high price: an index-linked annuity
typically means an income which starts around a third lower than one which will always remain the same (and so must always shrink in real terms if we don't buy the deflation argument).
But if inflation keeps rising, the increased price of living may mean an index-linked annuity
, which rises in line with inflation, is a better bet.
As well as the lump sum payment, Marc Rayment will also receive a tax- free, index-linked annuity
of pounds 50,000 a year, for as long as he lives.
A man buying a standard, non index-linked annuity
at the age of 60 could get an average payout of just pounds 622 a year for every pounds 10,000 of pension he had, the highest level since December 2001, but well down on the pounds 883 per year per pounds 10,000 he could have got in December 1997.
In effect, the fund aims to match the sort of payouts that new retirees might expect from an index-linked annuity
but without having to sacrifice their capital.