PensionsAug 28 2015

Retirement Advantage says new product is unique

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Retirement Advantage says new product is unique

Retirement Advantage has confirmed it will shortly launch a drawdown product with an annuity guarantee.

The launch date for the new product is yet to be confirmed, with the provider currently finalising pricing and testing with consumers, but bosses said “our plans are very well advanced.”

In terms of where the product will sit in the retirement income landscape Andrew Tully, pensions technical manager at Retirement Advantage, said the deal would be unique.

“We obviously had the big changes introduced in April, we’ve done lots of customer research since then,” he explained.

“What we found was that customers are looking for flexibility, the ability to pass money down to their families, but also some level of guaranteed income so what we tried to do was build one contract that contains all those things.

“The product is written under drawdown but in the drawdown sits an annuity. People can decide how much money they put into each and vary it over time.

Mr Tully added that “there is nothing else like this on the market” and there is also full flexibility to move the annuity income up and down, without needing to take money out.

However in July, Aegon launched a “third way” product on its platform, which it claimed provides the benefits of drawdown and an annuity.

The product, called Secure Retirement Income, builds on the success of Aegon’s variable annuities in the US, where Aegon sells US$7bn (£4.4bn) worth of them a year.

Duncan Jarrett, managing director for retail at Aegon UK, said: “There’s a clear gap in the market for services that provide the income certainty of an annuity with the flexibility of drawdown, and we believe these services have come of age.”

When asked for his view on Retirement Advantage’s new product, Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “It is logical to blend your income using drawdown and an annuity to balance off the advantages and drawbacks of both; taking it one step further and bundling them up within a single product may appeal to some advisers and their clients.”

It was back in May that MGM Advantage and Stonehaven announced the brands would merge to form Retirement Advantage and that the deal would result in the creation of a retirement account later this year.

Stonehaven, the equity release specialist, was bought by MGM Advantage for an undisclosed sum back in January 2014.

emma.hughes@ft.com