Prudential plc is one of the UK’s leading providers of pensions, annuities, investments and insurance.
They asked to help develop a series of follow-up emails to be sent to people considering buying an annuity from Prudential. The content would reinforce the points explained by Prudential’s staff over the phone, giving customers content they could read at their leisure and keep for later reference.
Annuities can be hard to understand, particularly when people are new to them. We used an informal tone and everyday language to explain the concepts as clearly as possible while also communicating honesty and transparency.
Client
Prudential plc
Media
Customer emails
Key aim
Explain complex financial products simply
What we wrote
Dear [name]
Thanks for chatting with me today. I hope you found our discussion useful.
When planning your retirement income, you need to think about how long you might live, the effect of inflation and changes in your financial needs over time.
People are living longer than they used to, so you could be relying on your pension annuity income for a long time.
On average, a man in the UK aged 65 can expect to live for another 17 years, while a woman aged 65 can expect to live for another 20 years (Office for National Statistics, 2007–09).
Inflation
Inflation is the general increase in prices over time. On the right, you can see the impact of inflation on the price of a basket of groceries. Over 20 years of inflation at 3%, the cost of these few items would rise from £8.44 to as much as £15.24 in 2030.
In the same way, inflation could affect the buying power of your pension income over the course of your retirement. If your retirement income was £10,000 a year, and inflation was running at 3%, after 10 years your income would have a ‘real value’ of £7,374. In other words, the buying power of your income would fall by nearly 24%, even though the amount you received would be the same.
Changing financial needs
Research by the Pensions Institute shows that people’s income needs in retirement vary over time. An example is shown in the diagram on the right.
On top of this, you might want to make major purchases such as a holiday, a new car or repairs to your home.
To make things easy for yourself, you need to think about how much income you want at the start of your retirement, and whether you might need to change it later on.
Which annuity should I choose?
Annuities are one way for you to convert your pension fund into a regular retirement income.
At Prudential, we offer two types of annuity:
- With the Guaranteed Pension Annuity, you receive exactly the same regular income throughout your retirement. Your income never goes down, although inflation may reduce its buying power.
- With the Income Choice Annuity, your income has the chance to grow, and you can also change how much you get.
To see a table summing up the pros and cons of these two types of annuity, click here.
What does this mean for me financially?
To help you decide which annuity is right for you, we’ve built an online calculator to show how your total income over 20 years would be different with each kind of annuity.
If you move the mouse arrow over each line and hold it still, you can see what your income in each year would be.
Don’t worry about choosing single or joint-life cover – I will cover this in my next email.