Aegon launches new guaranteed option

22 July 2010 | By Nicole Blackmore

Aegon has launched a new guaranteed income option which secures an income of 5 per cent of the original investment for 20 years.

Its previous five for life product offered 5 per cent guaranteed income for life from age 60 but was withdrawn in June 2009 due to market conditions.

Under the new guarantee on the company’s investment control bond, if the value of the bond grows beyond the original investment, this is locked in annually on the bond’s anniversary and returned to the client at the end of the term.

The secure income option allows clients to cover their own life and up to three other people by offering an inheritance benefit of the highest of 100.1 per cent of the cash-in value, the original investment less any income taken, or the highest recorded fund value, recorded on the anniversary, less any income taken. The maximum exposure is 50 per cent, which attracts a 1.2 per cent guarantee charge.

Hargreaves Lansdown pensions analyst Laith Khalaf says: “Five for life proved too costly so what we have here is five for 20. I think most clients will find the promise of their initial investment back over a period of 20 years underwhelming.”

Burrows & Cummins partner Billy Burrows says: “It is good to see a product offering 5 per cent at a time when we have low interest rates but I would rather see income growth than a lump sum at the end of the term.”

Intelligent Pensions technical director David Trenner says: “This new product is only really guaranteeing to return the original capital over 20 years – (20 x 5 per cent = 100 per cent), which for an investment of up to £50,000 could be achieved by putting the money in a bank account.”

Trenner adds: “For a cautious investor with 20 or more years to invest I think I would stick with the bank account, which has no smoke, no mirrors, yet still offers the same guarantee as Aegon. 

“For someone less cautious and with 20 or more years to invest I would be looking for something which offered the prospect of a real return without paying for the guarantees.”

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