THE LONGEVITY CONVERSATION|Video 5 of 9

Account-based pensions offer flexibility and growth potential but no longevity protection. Traditional annuities offer security but little flexibility. Investment-linked annuities (ILAs) sit between the two: payments vary with investment performance, but the number of units paid is guaranteed for life, however long that turns out to be.

Here’s how it works.

• A client invests $250,000 in, say, a Balanced option priced at $1.00 per unit, giving them 250,000 units.
• A pension factor based on age and product design (17, for a new retiree in one leading product) converts this into 14,700 units paid every year, for life.
• Only the unit value changes: at $1.00 per unit, that’s $14,700 in year one; if units rise to $1.05, it’s $15,435; if they fall to $0.97, it’s $14,259.
• The unit count never changes.

Modelling shows ILAs can generate 20–30% higher long-term income than traditional annuities or minimum account-based pension drawdowns. They’re not new either: TIAA’s CREF Variable Annuity, the first commercially offered variable annuity in the US, has been in the market since 1952 and today represents roughly US$290 billion in assets (TIAA, November 2025).

Related articles and resources:

• [Blog] What is an Investment-Linked Annuity?
• [Blog] 7 Facts on Investment-Linked Lifetime Annuities 
• [Blog] The Evolution of Retirement Income: A Story of Financial Innovation
• [Blog] Designing Annuities for the People
• [Blog] Administering the Real Lifetime Pension
• [White Paper] Thoughts Behind the Real Lifetime Pension 
• [White Paper] How to Profit from Other People’s Deaths

NEXT IN THE LONGEVITY CONVERSATION
Video 6: Planning for Confidence, Not Just Average Life Expectancy