Pensions 

Axa Life Invest drawdown offers ‘effective decumulation’ switching

Daniel Liberto

The product, Secure Advantage+, is a drawdown policy that guarantees a minimum income for life but, unlike other unit-linked guarantee products, Axa Life Invest claimed that savers can turn the guaranteed income option on and off at any time, and are able to move between different investment strategies.

Charges for the policy vary depending on whether it is a single or joint life option and the type of fund invested in. The minimum fee is 1.75 per cent, and the maximum 2.95 per cent.

According to Axa Life Invest, the added flexibility introduced by the Budget meant it was important to focus on “effective decumulation strategies” to support pensioners with active lifestyles and investment goals in early retirement.

The product’s income rewards feature was designed to meet these needs by allowing savers to maximise their guaranteed income in the early years of retirement, together with the option to defer retirement for up to 10 years to obtain a higher income.

The option of a guarantee on retirement income was found to be an important factor for the majority of people questioned in a survey conducted by the provider and Ipsos Mori.

The survey found that 76 per cent of respondents would be willing to pay an extra 1 per cent towards their pension pot in exchange for a guarantee on how much retirement income they would receive.

More than £25,000 must be invested to qualify for Secure Advantage+.

Provider view: Simon Smallcombe, managing director of Axa Life Invest UK, said: “While we have been developing these latest innovations for some time, they couldn’t have come at a better time for UK pension savers. To date providers and advisers have focused largely on asset accumulation strategies throughout the pre-retirement phase. But post-Budget innovation and advice must focus on effective decumulation strategies to support retirees who have active lifestyles and active investment goals in their early retirement. While it is clear that retirees should be able to make their own decisions, providers and advisers cannot leave them out in the cold. A guaranteed minimum income remains a definite need for many. Secure Advantage+ offers certainty and peace of mind, with greater flexibility than a level annuity and less financial risk than drawdown.”

Adviser view: Richard Wadsworth, financial planner for Edinburgh-based Carbon Financial Partners, said: “I immediately recoil from these sorts of things as they try very hard to do lots of things and often end up doing none particularly well, at least in part due to high costs and conflicting objectives. That is not to say they do not have a place, and the flexibility to turn the guarantee on or off is appealing, but will the costs and terms remain the same?”

Charges: There is a contract management cost of between 0.30 per cent and 0.55 per cent, a fund management charge of between 0.5 per cent and 0.7 per cent, which varies depending on the fund, and a guaranteed income charge of between 0.95 per cent and 1.5 per cent for the single life option, or between 1.4 per cent and 1.7 per cent for the joint life option.

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