Retirement products: the next generation

A new breed of retirement products is being introduced, with AXA flagging a new income guaranteed North offering at the same time as ING launches its first guaranteed pension product.

AXA is planning to expand on its successful capital guaranteed North range by introducing a product that offers clients guaranteed income for life. The new product will act like a market-linked or allocated pension (allowing clients to remain invested in the market), while also acting like traditional annuities, which guarantee income for life.

The group applies hedging strategies to the underlying investments to create the safety net needed to support the guarantee.

Clients will be able to roll funds into the product at a certain age, from which time until retirement upward market movements will be locked in through an annual ratchet. At retirement, the client would commence an allocated pension, with the client guaranteed to receive a certain percentage of the income base, which is based on the annual ratchet.

Unlike old-style annuities, the client can withdraw from the product at any time (with the usual penalties based on time spent in the product), and any remaining assets revert to the client’s beneficiaries on death.

The product is yet to gain regulatory approval and some features are still being ironed out, the group said. AXA plans to launch the product in 2010.

AXA’s existing North products have attracted more than $1 billion in funds under management since their inception in November 2007. This accounted for more than 7 per cent of net funds flow into superannuation in Australia in the year to June 30, 2009, AXA said.

More than 2,000 AXA-aligned and independent advisers support AXA’s North products, with the financial crisis proving to be timely for this particular offering.