These two options are available to supplement your income or as an alternative to your more traditional annuities. These investment options consist of two portions, which means that at the inception of the plan, your funds are split in two, with one portion providing a return on Investment and the other providing you with a guaranteed annuity income.
The Investment Plan with Income splits your funds into two, with a portion funding a 5-year endowment policy and the other portion providing a guaranteed annuity income for the 5-year period. The funds used to purchase the annuity will deplete at maturity, and the funds in the endowment that are invested in the collective investments of your choice will generate a return over the 5-year period that will hopefully match or exceed your original capital amount. In other words, the funds invested for growth are not guaranteed.
While there is greater upside potential, you run the risk of getting out a larger lump sum at maturity. Depending on market fluctuations, there is a chance of you getting out less than you originally invested. This is not the case for the Guaranteed Investment Plan with Income, as the name suggests, and while it also splits your funds into two, with a portion funding a 5-year endowment policy and the other portion providing a guaranteed annuity income for the 5-year period.
The difference is that the funds in the endowment will provide you with guaranteed growth over the 5-year period that equals the original capital invested.
You therefore get your money back after five years. The alternative, however, is that your annuity income, which is also guaranteed, will be lower than that provided by the Investment Plan with Income. This is a very important decision for a prospective client to make. You must carefully consider your specific circumstances and determine whether a higher income with an uncertain investment outcome or a lower income with a guaranteed investment outcome is better suited to your needs. It is also vital that the Financial Services Provider that renders the financial service consider the client’s circumstances and make an appropriate recommendation.
