Personal Pension  

‘Very little’ advisers can do to help small-pot retirees

There is little financial advisers can do to recoup a client’s pension pot at retirement, according to Axa Life Invest, and IFAs should instead be looking at pots five to 10 years in advance.

Speaking at an event launching the creation of Axa Life Invest – a company combining Axa Life Europe, Axa Reinsurance Ireland and Axa Hedging Services – the managing director of the UK division said greater preparation for retirement is needed.

Simon Smallcombe said there is “very little” advisers can do if someone is six months to a year away from retirement but facing a shortfall in their pension pot.

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Axa Life Invest offers a unit-linked guaranteed pension product, launched in 2010, which allows pension savers to protect capital and guarantee a minimum level of income in retirement. The product comes under the newly formed branding and is already being promoted to financial advisers as an alternative pre- and post-retirement solution.

Francois Robinet, director general of Axa Life Invest, said the rebrand and push into the UK market reflects the fact that pension savers may be looking for certainty.

“We are targeting places where a guarantee could be valuable,” he said.

Mr Smallcombe described the product as “defined benefit in a defined contribution” pension, adding that with recent years of economic uncertainty, advisers might be looking to lock in some of their clients’ gains prior to retirement.

“When people think of unit-linked or ‘third-way’ they think of at-retirement, when it comes to turning on that income,” he said. “But 75 to 80 per cent of what we do and what our nearest competitors do is before that, it is five to 10 years before retirement, before someone comes to take a decision.”

Such products are still seen as innovative even though they have existed for six years in the UK, Mr Smallcombe added.

While there has been no great flurry in third-way products, anecdotal evidence suggests that advisers are increasingly looking to a combination of retirement solutions for clients. With the concept of ‘defined ambition’ already alluded to by the pensions minister, products such as this could become more popular as the need for certainty increases. However, any guaranteed product comes at a price and the guarantee would be lost if the company become insolvent.