The account offers complete income flexibility and better death benefits than currently available from annuities, and the company claims that these benefits can add significant value to an annuity, especially on death.
Retirement Advantage compares for example a client using £100,000 to buy a guaranteed annuity via The Retirement Account or via a traditional annuity, either option securing £6,000 of income. A 100% money-back guarantee is selected so whatever happens the pension pot is repaid in full. If the client dies after year one, £94,000 would be paid out of the traditional annuity and taxed at the nominees marginal rate. However, the flexible nature of The Retirement Account means that the nominee could elect to withdraw the money in instalments over a number of years.
By withdrawing the lump sum gradually, this could pay a total lump sum of £76,115 compared to the £55,677 if the traditional annuity was used, or £20,438 extra income2.
Developed from scratch following the introduction of the new pension freedoms, The Retirement Account incorporates a drawdown pot, a cash account and a guaranteed annuity in one product, all within drawdown rules. The key features include:
-
A guaranteed income for life, which can be started at any point
-
Flexible to adapt to changing needs, for example more guaranteed income can be secured later in retirement or income can be re-directed into drawdown
-
Income can be stopped and started at any point
-
Cash for ad-hoc spending can be accessed through the drawdown component or cash account
-
Money can remain invested with the potential to grow
-
Cascade wealth on death, within the pension wrapper, managing tax
-
Easy to use, with only one lot of administration, one annual statement, one set of charges
Peter Carter, product and marketing director, Retirement Advantage, said:
‘The new pension rules demanded fresh thinking, and The Retirement Account has been designed from the ground up following extensive consultation with advisers. By combining the best features of annuities and income drawdown, advisers and their clients no longer need to make a choice between the two.
‘We believe this product will mark the beginning of the end for the traditional annuity. Due to the way the account is structured within the drawdown rules, you are able to stop and start income at any point, as well as better control how death benefits are paid. Importantly, there is not likely to be any significant difference in the annuity rate being offered between a Retirement Account annuity and one of our stand-alone products, making this an easy choice because of the in-built flexibility.
‘We have invested in a new technology platform to develop the product and we are backing up the launch with a high level of support. The Retirement Account is only available through financial advisers, as we believe the choice and complexities around retirement mean consumers need to seek proper advice before making any decisions.’
‘We have worked hard to deliver a great product, but we know the market will not stand still. So, we have built a platform which allows us to introduce new developments as we receive feedback from advisers. This has been part of our approach from day one. We want advisers to tell us what they would like to see from future development phases.’
The fund range available through The Retirement Account comprises a mix of active and passive funds, with cautious, balanced and adventurous approaches, as well as protected funds, all from well-known and respected fund managers. These funds have been thoroughly researched before being selected. An Investment Committee will monitor the funds on a monthly basis to ensure performance against objectives, with independent oversight provided by Square Mile3.
The Retirement Account has a low cost, simple drawdown charging structure of 0.41% - 0.70%4. The product is fee driven, with adviser fees generated through any mix of an initial fee, on-going fee or a one-off fee for the advice provided.
|
