WORTHING, England, October 19, 2015 /PRNewswire/ --
Retirement Advantage, the retirement specialist, believes the launch of its Retirement Account will effectively mark the beginning of the end for traditional annuities, due to the innovative way the account is structured.
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 customer 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 customer 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 income.
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
Chris Evans, group chief executive, Retirement Advantage, said: 'The new pension rules demanded fresh thinking, and The Retirement Account is our reply. The product is as innovative as the pension freedoms are radical. It has been designed from a blank sheet of paper to enable people to take full advantage of the new rules.
'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.
'Our research continues to show people want the security of a guaranteed income, the ability to withdraw ad-hoc lump sums, the opportunity to grow the value of investments and leave a legacy, all within a product which minimises tax. The Retirement Account delivers all of this in one competitive, flexible solution which is easy to manage.
'Retirement can be a complicated business which is why we are only making The Retirement Account available through financial advisers, as we believe people need to seek proper financial advice before making any decisions.'
The Retirement Account is being supported by the launch of a free to use Discover Your Retirement Options tool. This shows how different options will change retirement outcomes, including income levels and death benefits. People will be able to request quotes from their financial adviser and access the Discover Your Retirement Options tool by the end of the year.
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 Mile.
The Retirement Account has a low cost, simple drawdown charging structure of 0.41% - 0.70%. 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.
Notes to editors
1. Further details about The Retirement Account can be found here: http://www.retirementadvantage.com/adviser/products/retirement-account/find-out-more
2. Case study of phasing income guarantees on death - http://www.retirementadvantage.com/downloads/40-034-09-15-the-retirement-account-minimise-tax-liability-for-beneficiaries.pdf
3. Research conducted by YouGov Plc on behalf of Retirement Advantage. When thinking about retirement income, 43% of people thought a guaranteed income was most important, although very closely followed by having flexibility (33%), where there is some guaranteed income, but also the ability to manage funds to generate additional income and access cash as required.
The survey was carried out online between 6 August and 11 August 2015. The total sample size was 1001 adults. The figures have been weighted and are representative of all those aged 50+ with some form of DC pension and not in retirement.
4. Further information on Square Mile can be found here: http://www.squaremileresearch.com/
5. The Retirement Account has a tiered annual charge. The examples given are for pot sizes ranging from £50,000 (0.70%) to £500,000 (0.41%) and assume investment in the Retirement Advantage Balanced Index Portfolio Fund. Charges will vary based on pot size and fund selection. Cost does not include an initial setup charge of £150.
The minimum age at entry for The Retirement Account is 55. The maximum age at entry is 85 for the guaranteed annuity component with no maximum age for the drawdown component. The minimum transfer value after tax-free cash is £20,000, with a minimum purchase of £10,000 required for a guaranteed annuity if this is chosen at outset.
About Retirement Advantage
Previously known as MGM Advantage and Stonehaven, Retirement Advantage can trace its roots back to 1852. In 2015, the company changed its name to Retirement Advantage, merging the equity release and retirement income divisions.
The company specialises in retirement, with award-winning expertise developing products which can help people make the most of their retirement savings and/or the value in their property.
Products include the Guaranteed Annuity, providing the best possible guaranteed lifetime income for individual circumstances; the Flexible Income Annuity, which offers the opportunity for retirement income to grow; and equity release products, which allow homeowners the opportunity to release cash from their home without having to move or give up ownership.
Our Equity release products are lifetime mortgages. To understand the features and risks ask for a personalised illustration.
Inflation will reduce how much your income is worth over the years. The value of Investment linked Annuities can fluctuate. Income could go down as well as up. Taking income or withdrawals in excess of growth may result in the fund running out quicker than expected. Taxation rules and regulations may change in the future.
Retirement Advantage is financially strong, as rated by AKG (an independent company that specialises in providing ratings for the financial services industry).
Retirement Advantage is the retail brand for a group of companies which manages assets of almost £1.8bn (as at December 2014).
For further information
SOURCE Retirement Advantage