Personal Pension  

Product review: MetLife unit-linked pension product range

MetLife has refreshed its unit-linked guarantee pension product range with improved rates available for new business.

The enhancements, which apply from 29 July 2013, are designed to move its proposition closer to annuity rates.

Charges apply on income guarantees, which provide an income for life; and capital guarantees, which protect against possible downturns in accumulation.

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Minimum terms on capital guarantees start at 10 years, a reduction from the previous 20 years, and charges start at 0.35 per cent, down from 0.6 per cent. For income guarantees, charges range between 0.95 and 1.2 per cent.

The new terms are available on MetLife’s Managed Wealth Portfolio Foundation and Min funds for the income guarantee, while the capital guarantee is available on the whole wealth portfolio range: Foundation, Min, Mid and Max funds. Fund charges remain unchanged.

www.metlife.co.uk

Comment

It is widely accepted wisdom that some risk is necessary to get a decent investment return. Adding a capital guarantee on to a product allows investors to feel safe in the knowledge that they will secure a minimum return.

In terms of pensions savers, it would be fair to ask why this is necessary. Saving over such a long period of time is likely to even out any bumps in the road.

This type of product really only comes into its own when the market has crashed on your retirement date and you are the only one sitting there with a guarantee.

But such guarantees are not cheap, adding to the negative impact on investment returns.

For the income side, the guarantee is only available on the lower-risk products anyway, further reducing what is already likely to be a modest return.

And guarantees are obviously never completely safe; they rely on the ongoing financial health of MetLife since, if it no longer exists, neither does your guarantee.

Such products are likely to be suitable for some cautious investors, including those for whom an annuity is not appropriate.

The improvements here may cause some advisers to take another look, but for many the cost exceeds the benefit.