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Statutory retirement age is 65. However, plan members may take early retirement at any point after age 55 although the longer you wait to draw income the more you will receive later. Income payments may be paid monthly, quarterly, semi-annually or annually in arrears depending in the retirement income vehicle. 

Annuities

Annuities are products guaranteed by the issuing insurance company to provide a set income at a pre-determined frequency utilizing the plan member’s assets on retirement.

Reasons for buying an annuity include:

  • You want a fixed income guaranteed for life
  • You don’t want to make investment decisions
  • You want to lock in your investments at current rates
  • You are concerned you may outlive your savings


As the level of interest rates determines the level of retirement income derived from an annuity (i.e. low rates mean low income levels) versus the drawdown method, plan members should consider their options carefully before deciding on a specific course of action. Consult a BIAS pension specialist for advice – click here to send an email.


There are many different annuity types to choose from (click here for a link to Wikipedia). Examples include:Pension Solutions Retirement Income Options

  • Life Annuities – provide regular income for the rest of your life. Single life annuities provide only income to the single life, not for a spouse. Joint life annuities pay income even after you die for the remainder of your spouse’s life. Life annuities may also have minimum guarantee provisions where typically the longer the guarantee period, the lower the periodic income payments to you.
  • Installment Refund Annuities – provide regular income as with a life annuity but in addition if both you and your spouse die before amounts paid out are less than the original cost of the annuity, payments will continue to your beneficiaries until the total amount paid out in benefits equals the original cost.
  • Term Annuities – provide income for a fixed term only. The Pension Commission has indicated that while term annuities are expected to cover a person’s expected remaining years of life, shorter periods may be applied for on a case by case basis should the person for example have a small pension. Income is a combination of interest and principal.

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Drawdown

The alternative to obtaining pension income via an annuity under Bermuda pension law is the drawdown method. This can only be used within BIAS’ Personal Retirement Plan (PRP) – click here for more specific details of the plan. This alternative is particularly attractive when interest rates are low meaning annuity income levels are also low.

PRP plan members may begin to draw income from age 55 by simple drawdown from their plan assets rather than an annuity. Bermuda law mandates the following maximum drawdown levels from plan assets:

  • from 55 to 64 years old, enjoy a 3% maximum drawdown
  • from 65 to 69 years old: 7% maximum drawdown
  • from 70 to 80 years old: 10% maximum drawdown
  • Above 80 years old, enjoy a maximum drawdown of 25% or $10,000, whichever is higher

Other PRP plan features:

  • Control of Investments – plan members continue to decide how their plan assets are invested. This will be through one of BIAS’ six asset allocation strategies determined by the plan member’s answers to a risk profile questionnaire.
  • Residual Benefit – with simple annuities, all plan assets go to the insurance company issuing the annuity leaving nothing for beneficiaries. With the PRP a residual benefit should be available until the plan member reaches his / her mid-80s.

Click here to determine your risk profile.

 

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