AXA Life Invest has launched Secure Advantage+, a type of drawdown product which has been designed to meet the needs of those seeking retirement income. It allows pension savers to add a range of benefits and guarantees to be tailored to their own retirement plans.
It features the guaranteed benefit – a partial guarantee over five to seven years, designed to protect investors from severe losses. Policyholders are guaranteed to get back 80 per cent of the original investment but if the investment grows sufficiently, a ‘lock-in’ feature converts to 110 per cent of the pot which can result in additional threshold steps of 10 per cent and can result in greater gains if markets continue to rise.
Once the investment has risen to 110 per cent or higher, it will never suffer further reductions unless the policyholder makes surrenders or transfers from the guaranteed part of their plan. Minimum payment into the plan is £10,000 and any policyholders must be between the ages of 40 and 75 to be able to access the guarantee. At least £15,000 must be allocated to a single eligible fund and linked to the guarantee benefit.
Pension guarantees, although previously very common, are a rare commodity in the current market. Retirement annuities with either a pre-determined minimum fund or guaranteed annuity rate, have long been a thing of the past and new entitlement to defined benefit schemes sits almost exclusively in the private sector. Therefore any new pension products offering guarantees are likely to generate interest.
A secure income is what the majority of retirees desire to ensure a comfortable and financially worry-free later life. This product takes a slightly different approach, by guaranteeing a pre-determined level of the fund while allocating the remainder to draw as income over a specified term. Investors not looking to expose capital to a reasonable level of risk are unlikely to benefit from this product, seeing as volatility will probably be insufficient to benefit from either the guarantee or lock-in. The lock-in is the most attractive feature, as the odds of equity funds dropping 20 per cent after five years are slim. The guarantee offered could be considered soft but may just provide an additional blanket of security for consumers to sleep soundly in retirement.
Despite the high level of current market turmoil, all funds have so far performed within or just below their volatility ranges since launch on 3 May.