Secondly, according to the workings of a stock standard conventional annuity, once a person dies, the income ceases and there is nothing to bequeath to heirs and dependants. In other words, if you die the day after the contract is issued, your estate is left with nothing. For a retiree with a dependant spouse, this could be detrimental. There have, however, been various product enhancements that largely address these dire consequences and deserve to be explored with your planner before making a final decision.

One important nuance that is critical in deciding between these two vehicles is that an Individual Living Annuity can be transferred to a conventional annuity at any stage in the future, but not the other way around. One benefit of this is that it provides one the opportunity to invest in an ILA upon retiring with the potential view of switching to a conventional life annuity when one is older and the rates (incomes) become more favourable.

To get back to the original question, if one knew their exact life expectancy then the decision could become far more scientific. This would then lend a strong argument to select a conventional for those who are set to break the Guinness book of records for the oldest person and a living annuity for those that are set to leave this earth in a more untimely fashion. However, we know the answer to this question will only be answered when it is too late.

With this in mind, it is clear that the pros and cons of each vehicle should be carefully considered for each person’s individual circumstances before any decision is taken.

acsis Limited is an authorised financial services provider. The response to the question covers some of the issues in a general and factual manner and does not constitute advice. It is important to consult with a financial planner who, after an analysis of the individuals’ personal needs, goals and circumstances, will be able to provide comprehensive and appropriate advice.

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