Axa Life Invest has attempted to steal a post-Budget march on life company rivals with the launch of a new unit-linked guarantee pension that offers additional flexibility, including the ability to switch on or off guaranteed lifetime income.
Axa said the product was its “most advanced yet” in the unit-linked space, and had been designed to meet expected demand for post-Budget for at-retirement products with the “stability of an annuity and the flexibility of drawdown”.
The product, SecureAdvantage+, offers guaranteed minimum income for life that can be switched on or off, while savers can also select different investment strategies as their circumstances change.
Axa said it has a “guaranteed income shape”, meaning customers who take out the guaranteed option can take more income at the outset and taper this down through their retirement.
Unit-linked guarantees are written under drawdown rules and positioned in the middle ground between conventional annuities and income drawdown, which offer some guarantee over income or capital values while allowing a fund to remain invested.
Currently there are three firms offering the products: Metlife, which is the largest provider accounting for around 75 per cent of the market, Axa Life and Aegon.
Last week, FTAdviser revealed that a number of life companies which offer annuities are seeking to enter the unit-linked guarantee space following the Budget reforms that are expected to dramatically reduce demand for conventional annuities.
Prudential, whose US arm is a major player in a far more developed market for the products across the Atlantic, has been linked with a launch, as has Partnership.
Speaking to FTAdviser, Simon Smallcombe, managing director of Axa Life Invest UK, said people want “flexibility and certainty”.
Mr Smallcombe, who previously said that he expects this market to double from the current £1.5bn to £3bn within the next two years, added: “This... is the latest in our new product architecture. We can add different features to this.
“Testing and launch events have been successful with advisers; 150 advisers tested it and the feedback was very, very positive.”
Dominic Grinstead, managing director of MetLife UK, said “everyone” would be looking at the space and that “all big life companies” were likely to move into the space in the longer term, as they seek new business lines to replace lost revenues.
Nigel Barlow, director of product development at enhanced annuity specialist Partnership, said it is “looking at third way products” and added that he could not “imagine any provider in the market won’t be looking at them”.
Mr Barlow added: “We fully expect more people will want more flexibility while a certain proportion will still want guarantees and we need to build them in a simple and understandable way.
“Some people will still appreciate a longevity guarantee but others may want to take more risk.”
