Personal Pension  

Axa Wealth to offer income guarantees

Axa Wealth to offer income guarantees

Axa Wealth is offering a new unit-linked guarantee as part of its soon be launched reform-ready retirement portfolio service.

The firm said that as the market starts to open up to new retirement options from 6 April, there will be increased demand for unit-linked guarantees. Therefore, it is offering advisers and clients access to a guaranteed minimum retirement income through Axa Life Invest’s Secure Advantage product.

Unit-linked guarantees are products written under drawdown rules and positioned in the middle ground between conventional annuities and income drawdown, which offer some guarantee over income or capital values, while allowing a fund to remain invested.

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Axa Wealth said its new product would be called Secure Advantage+ and customers can choose optional features to benefit from a minimum guaranteed income for life that can be turned off and on as needed, as well as having the ability to take more income at the beginning of retirement when they may be more active.

With the aim of helping investors mitigate the effects of market volatility, they are able to select different investment strategies according to their attitude to risk and potentially benefit from volatility protection built into the underlying funds.

David Thompson, managing director of proposition and business development at Axa Wealth, commented that unit-linked guarantees are coming of age. “While they may have been more niche in the past, the new pension reforms will open up many new retirement planning opportunities for these types of flexible products.”

Account holders also have the option of adding on a death benefit to their plan, which gives named beneficiaries the full value of their drawdown plan, minus any withdrawals taken over the policyholder’s lifetime.

Simon Smallcombe, global director of distribution at Axa Life Invest, added: “We believe the market for unit-linked guarantees will grow significantly in the UK from April 2015 onwards, as people seek to take advantage of the flexibility which the pension reforms afford, while continuing to seek the security of a minimum level of income in retirement.”

Earlier this month, FTAdviser revealed that Axa Wealth will be offering the full suite of at-retirement access options in time for 6 April.

At the end of last year, Aegon also detailed its post-April proposition, stating that its platform will enable customers and their advisers to combine income drawdown and unit-linked guarantees.

However, last year, some providers warned that unit-linked guarantees do not offer savers value for money, with guarantees costing between 0.95 per cent to 1.5 per cent.

Metlife’s UK arm is the market leader, with the company quoting a 75-80 per cent market share, with Axa and Aegon their only competition, although it’s largely expected that this market will grow to plug the annuity drop-off expected by some providers.

ruth.gillbe@ft.com