PensionsJul 2 2014

Retirees plan to take money and reinvest: Aegon

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An Aegon-commissioned survey has revealed that 44 per cent of UK adults intend to take advantage of the radical pension changes in the Budget.

The OnePoll survey of 2,000 nationally representative adults conducted in May revealed that 44 per cent said they would put the money into a bank account and 33 per cent would invest it in an Isa.

It also found that 81 per cent would be interested in products which offered a guaranteed income for life but allowed them to cash it in if circumstances changed. FTAdviser previously revealed that a number of life companies are looking at launching so-called ‘third way’ unit-linked guarantee products.

Gavin Casey, distribution director for Aegon’s unit-linked guarantees business, told FTAdviser that the market is about to get a lot more crowded.

He said: “We know that a number of other insurance companies are looking at this space, they are UK insurers which have American subsiduaries that are very big in this space over there, so there will be a number of people coming in with guaranteed income products like ours.”

“The interesting thing is that we don’t actually know what some people will come out with, but regardless it’s a fantastic time for the industry, as customer are going to need advice or guidance in whatever form because there’s going to be a load more choice.”

Alan Loomes, financial adviser at Fraser Heath, said that with Aegon, Axa and MetLife already in the guaranteed income space, he has already been offering a ‘third way’ for several years, but the increased innovation will give clients a full range of at-retirement options.

He said: “These aren’t the simplest options, they can often take two or three meetings to fully explain to clients, but we believe that its important to find the best retirement income product for them, not the simplest.”

Aegon’s own review of its Secure Lifetime Income product showed that 92 per cent of customers locked in income gains by using its ‘monthiversary’ feature, with an average increase in their income base of 7.3 per cent.

The income guarantee plan has some similarities to an annuity, in that it provides a guaranteed income for life, but it also allows customers to capture higher income through any potential investment growth, whilst allowing access to capital if needed.

Mr Casey said: “We give people an opportunity to take a guaranteed lifetime withdrawal, then because their money’s still invested we look at the valuation for every month at the end of the year and lock in that highest amount and increase their income based on the highest value it had through the previous 12 months.

“In terms of how many take withdrawals, it changes over time, but there’s a rough split of about 2/3 of our investors taking an income immediately and 1/3 actually defer taking their income until some point in the future.”