In two minds about hybrids? Talk to number one

Hybrid retirement solutions that blend different elements are more likely to provide the results that retirees want.

Partnership, has launched the new Enhanced Retirement Account (ERA) as a result.

With only one simple application for three elements, this new product will offer clients the security and flexibility they desire.

There is a world of choice for those considering what to do with their pension fund. Each choice has its attractions but, crucially, each also has potential drawbacks.

For example, withdrawing some or all of one’s pension fund as cash is clearly attractive to those wanting an immediate lump sum. However, taking too much in the early years could incur a large tax bill and may reduce one’s standard of living later on.

Similarly, Flexi-Access Drawdown can benefit those who want to withdraw money from their pension fund while leaving the rest invested.

On the down side, the money that’s left invested may not grow enough to make up for the amount taken out and it could fall, as well as rise, in value depending on investment performance.

Giving retirees both flexibility and security in a single proposition requires a new generation of retirement solutions.

Indeed, the FCA has stated that it expects new ‘hybrid’ products to be developed.

This blended approach, an annuity with Flexi-Access Drawdown within a single plan, has a number of advantages.

The most significant benefit to the individual is the ability to secure a guaranteed income for life – the cornerstone of long-term financial planning – while having the flexibility to invest some or the entire remaining fund.

On top of this, should a person’s circumstances change: any income left over from the annuity could be reinvested within the product. With the right product, investment fees could be very low, potentially leading to a higher future value

In fact Partnership believe the ERA brings the best of both worlds to you and your clients - without the hassle.

* Tax efficient - unused income can be rolled up in the ERA and not incur income tax.

* Low cost, complete transparency - total charges only 0.43% - 0.59% with no transaction fees.

* Simple to set up and to manage - one application, one income payment and one P60.

* Easy for clients to understand - research shows that customers really understand the ERA `and are attracted to the benefits it can provide.

The ERA is a Self-Invested Personal Pension Plan (SIPP) comprising three core elements: a guaranteed income for life, a Flexible Investment Element and a cash account.

The guaranteed income is provided by an enhanced annuity. This is a strong benefit as it is estimated that more than 61% of people could qualify for an enhanced annuity due to ill-health or lifestyle choices.

And because the enhanced annuity is medically-underwritten, it could be the cheapest way of securing guaranteed income.

The Flexible Investment Element allows clients to keep surplus funds in Flexi-Access Drawdown. This offers a choice of low-cost passive funds from Vanguard, a leading name in passive investment strategies.

The funds in the Flexible Investment Element can be taken at any time: as a lump sum, as ad-hoc withdrawals, or to purchase additional guaranteed income for life.

The third element of the ERA is a cash account, which can be used to consolidate income payments or as a temporary safe-haven when markets are unsettled. It can also hold any unused income, protecting it from the taxman.

The ERA is being launched by Partnership to give customers security and flexibility they need in one tax-efficient, low-cost and simple solution – with one easy application.

Andrew Megson, Partnership’s Managing Director of Retirement, says, “The launch of this product ushers in a new era for retirees. We have worked hard to understand consumers’ needs under the new regulations.

The Enhanced Retirement Account provides people with the reassurance of a guaranteed income, while allowing them to benefit from investment growth as well as flexible drawdown. This means they have the best of both worlds.”

For more information, visit partnership.co.uk/ERA