AXA launches income-focused product for retirees

AXA fixed interest bonds australian equities capital gains chief investment officer

10 June 2010
| By By Chris Kennedy |

AXA has launched an income-generating product aimed at people focused on consistent income heading into retirement rather than accumulating wealth.

AXA's Income Generator is a market-linked multi-asset portfolio with an income bias. Assets within the portfolio are managed by specially selected managers with tailored mandates to identify income-producing opportunities.

The Income Generator will be managed by AXA subsidiary ipac. ipac chief investment officer Jeff Rogers said that while the investment industry tended to have an accumulation mindset, this product focused primarily on returning regular income, with any capital growth returned to the investor.

The portfolio features a strong bias towards high yield Australian equities such as the four major banks and Telstra, with that aspect of the portfolio to be managed by Legg Mason and Ankura.

The defensive side of the portfolio features a heavy fixed interest bias, including high yield government bonds and corporate issues, to be managed by Macquarie.

The Income Generator is targeted at people with a zero or low tax rate, such as people on an allocated pension, who can use the product to top up their pension income.

The product aims to return a consistently higher yield than the cash rate plus capital growth. The current income estimate for 2010-11 is 5.7 per cent after investment fees and franking credits, so an investment of $400,000 to $500,000 could provide a useful complementary income, Rogers said.

While a term deposit can offer similar returns now they aren't able to adjust for inflation and simply get rolled over with no guarantees. "So you're betting on an ongoing standard cash rate and inflation, with no protection against unforeseen circumstances such as unexpected inflation," Rogers said.

Income Generator payments will be distributed 13 times a year, with income distributed monthly plus one annual payment of capital gains that will be invested back into the portfolio.

The Income Generator is more likely to be recommended as an alternative to AXA's recently released North Protected Retirement Guarantee product than be used in conjunction with it.

"It hasn't been developed with reference to North at all. It's been developed with the idea that retirement is about income not wealth, so let's focus on income. There are parts of each asset class where the asset delivers in income as opposed to capital gain," Rogers said.

While the North Protected Retirement Guarantee featured a balance sheet guarantee, the income generator was yield focused with no guarantee, so it should return a higher yield, Rogers said.

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