Almost 80 per cent of advisers are either using or are actively interested in using hybrid retirement products, a new survey conducted by Retirement Advantage has suggested.
The survey of 107 financial advisers found that 77 per cent were in favour of the products, which mix the flexibility of drawdown accounts and the guraranteed income of an annuity.
At the other end of the scale, only 1 per cent of advisers said they had considered the products and rejected them, leading Retirement Advantage to claim the products had “become mainstream”.
A relatively new phenomenon, a number of providers - including Retirement Advantage - have introduced hybrid retirement products to meet the new demands of pension freedoms.
Some products have been in the form of a mixture of annuities and drawdown products held together within a pension wrapper, while others have been single products. Retirement Advantage’s “Retirement Account” is an example of the former, while Aegon’s Secure Lifetime Income product is an example of the latter.
While many providers have found the market slow to take-up the new products, Retirement Advantage claimed the results of the survey demonstrated that advisers were already coming around to the idea.
Nevertheless, just 10 per cent of advisers said hybrid products had become a “key part of their toolkit”. Thirty-four per cent said they expected hybrids to become key.
Andrew Tully, pensions technical director at Retirement Advantage, said pension freedoms had so far given rise to little innovation, but added that hybrid retirement products were a “notable exception”.
“These hybrid products, blending annuities and drawdown in one product wrapper, neatly bridge the gap between the two approaches to retirement, providing a cost effective solution for a wide range of clients.”
He said he had seen a “positive response” from advisers to the Retirement Account, adding that clients were “looking for security and certainty” in a “climate of uncertainty and change”.
Bill Marshall, a financial planner with Lamb and Associates Lifestyle Financial Planning, said he had not used hybrid products yet, but was “interested” in doing so, saying “the concept is good”.
However, he said they were not appropriate for many of his clients, few of whom were drawing down on their pension because they had other sources of income. He said inheritance tax rules meant it was sensible put off drawing down on a pension until the other income sources have been exhausted.
Mr Marshall also said he would like to see the hybrid market mature, saying there was a danger that “if they try a product and it doesn’t take off, there is a danger they will be tempted to sell the back book.”
james.fernyhough@ft.com
