Aegon to bring drawdown to Retiready platform
Aegon plans to add a pension drawdown product to its direct-to-consumer Retiready platform next year.
A spokesperson for Aegon said: "We're always looking at how we can help the UK get ready for retirement and as part of this mission we are actively working on plans to deliver a simple drawdown solution through our Retiready platform in 2015."
Aegon already offers drawdown on its Aegon Retirement Choices platform for financial advisers, and is looking to extend that service over to the Retiready platform using some of the same resources.
Since the March Budget, the financial press has been awash with speculation about how people will take an income in retirement, with some predicting a move away from purchasing an annuity and an increased interest in income drawdown.
According to research commissioned by Aegon, nearly half of people surveyed said they intend to take advantage of the new options for taking an income in retirement, but the majority said they would keep their money in a bank account or ISA.
Among other new developments in the market, Axa Life Invest in May launched a next-generation retirement product combining features of an annuity and drawdown.
Also following the Budget announcements, Aegon Ireland product director Colin Bell told Moneywise's sister title Money Observer he hopes to bring the Aegon Secure Lifetime Income unit-linked guarantee to the UK market.
Similar to an annuity, it offers an income for life in the form of a percentage of the initial premium. However, unlike some other unit-linked guarantees which promise to review the client's income each year and raise it if the underlying value of the investment has increased, the Aegon plan allows clients to increase their income based on the highest monthly point in the past 12 months.
Of course, this added opportunity for increased income comes at a premium.
Unit-linked guarantees are slightly more expensive than annuities to begin with, and having 12 opportunities to raise payout rates makes the Aegon Secure Lifetime Income plan more expensive still.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An alternative to an annuity, income drawdown (also known as an unsecured pension) allows you to take income from your pension fund while the fund remains invested and so continues to benefit from any fund growth. The drawdown of income has to be calculated carefully as taking too much income could exhaust the pension fund so experts say the annual drawdown must not exceed what the assets would normally yield in an average year. The invested pension fund could also be hit by market turbulence and the value of the assets could fall.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.