Personal PensionMay 21 2015

Aviva plans summer launch for ‘third way’ products

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Aviva plans summer launch for ‘third way’ products

Aviva is planning to launch a range of new ‘third way’ blended pension products over this summer, after analysing the space between annuities and drawdown.

Speaking to FTAdviser, Aviva’s head of policy for retirement solutions John Lawson, said that the firm is now at the point where it knows what the future business model looks like, after having looked in a lot of depth at the “space between annuities and drawdown, to make something work”.

However, instead of adding any new products, the firm decided that blending annuities and drawdown was the most sensible way to go. “There could be a number of ways of blending them and that’s what we are looking at the moment.”

“A lot of what we’ve done up until now is to make the products we already have fit for the new world, adding things like flexi-access drawdown and UFPLS onto existing products so customers can have those options if they want.”

The new blended solutions will be ready in the next couple of months, according to Mr Lawson, who added that advisers have been waiting patiently for something a bit different.

“I think the conclusion is that drawdown will suit the younger ages better than an annuity, but some people will be so risk averse that they want to cover their fixed expenditure with a guarantee at an earlier age, whether that’s going to give them the optimum return or not; so that’s what we’ve been working on with the retirement options.

“We’ve been looking at other things like fixed term annuities and we reckon that again they are probably not worthwhile doing. You’re probably better just going into drawdown and building an investment portfolio, whether that’s cash or things like gilts or corporate bonds over a fixed term.”

Mr Lawson said it was not through want of trying that the firm had not come up with any new products, noting that they also looked at adding guarantees to investment products.

“We tried every possible option and tried to turn over every stone looking at all the potential solutions, and we just reached the conclusion that blending what we’ve already got is just going to be the most efficient way.

“Drawdown the most efficient way to get a return and annuity the most efficient way to get a guaranteed income and therefore everything should just be a blend of those two things.”

ruth.gillbe@ft.com