Q&A Column
Question: When choosing the term of the new Term Allocated Pension products, I understand that you can choose a term in the range between the life expectancy of the recipient or their spouse, and their life expectancies as if they were five years younger. I have a client couple looking at this product. He is 65 and his wife is 57. His life expectancy range is 16.21 to 20.05 (between age 65 and 60) and his wife’s is 26.74 to 31.26 (for age 52 to 57). Does this mean I can choose any term between 16.21 and 31.26?
Answer: As you said, the pensioner can select a term between their life expectancy at the commencement of the income stream and their life expectancy as if they were five years younger. These numbers are rounded up to the nearest whole year. For your client, this range (using the 95-97 life tables) is from 17 years to 21 years.
The range for your client’s spouse’s life expectancy calculated in the same way would be 27 to 32 years.
Also, if the income stream is commenced between September 20, 2004, and December 31, 2004, the pensioner has the choice between the 95-97 life tables and the new life tables. The ranges above calculated from the new life tables are (respectively) 18 to 22 years, and 29 to 33 years.
Consequently, your clients would have to choose a term between 17 years and 22 years, or between 27 and 33 years. They could not choose a term between 23 and 26 years.
Jason Menzies is head of technical services, Tribeca .
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