Standard Life is replacing its annuity fund with a multi-asset strategy for tens of thousands of retirement investors, as the number of savers opting for drawdown is increasing.
According to Jenny Holt, head of customer, workplace and investment proposition at Standard Life, only five per cent of the provider’s customers bought an annuity last year.
The majority (64 per cent) opted for drawdown, while the remaining chose to take a lump sum.
Ms Holt said: “This is something that we have been looking at since pensions freedoms were introduced in 2015. There is demand for a change.”
Some 70,000 customers which are now invested in the annuity purchase fund will be moved to the Standard Life at retirement multi asset universal pension fund, which will have the same charges.
While the former was invested mainly in bonds, the latter will have an asset mix of equities, bonds, property and cash, Ms Holt said.
The clients invested in the annuity fund – normally people five years or less away from retirement - will receive a letter from Standard Life this month notifying them of the change.
These customers will have six to eight weeks to opt out of the fund and remain with an annuity solution, Ms Holt said.
“We will still have an investment option that will target annuities,” she added.
In January 2018, the provider will start issuing letters to 1m clients which in the future will be affected by this change.
These are customers more than five years away from taking their pension, who will be changed to the new fund as they are closer to their selected retirement date.
These savers will have the same six to eight weeks to opt for an annuity product, Ms Holt concluded.
Standard Life is not the first provider to change its investment strategy due to pension freedoms.
Scottish Widows is changing the default investment strategy of its group personal pension plan, moving its asset portfolio into a mix of equities, bonds and cash over the five years preceding the members’ selected retirement date.
maria.espadinha@ft.com
