Axa piloting new variable annuity range

29 July 2010 | By Nicole Blackmore

Axa has unveiled a new range of variable annuity products it is piloting with a small group of specialist IFAs.

Money Marketing revealed in February that Axa had revived plans to develop a variable annuity and this month revealed that a pilot scheme was being launched.

Aegon last week launched a new guaranteed income opt-ion which secures an income of 5 per cent of the original investment for 20 years.

Aegon’s previous five for life product was replaced in June 2009 with the Aegon secure lifetime income product, which provides age-related income guarantees, starting at 3.5 per cent at age 60 and rising to 5 per cent from age 75.

Axa will not disclose the charges while the products are still on pilot as it says these may change before the full roll-out, expected for Q3 or Q4.

The Secure Advantage range guarantees either the return of invested capital at the end of 10 years or lifetime income on an immediate or deferred basis.

Both of these guarantee features offer annual lock-ins, where investment growth can be secured for the purposes of calculating benefits.

Maximum equity exposure is 50 per cent for protected capital plans and 60 per cent for lifetime income plans.

Axa Wealth managing director of wealth, investments and distribution David Thompson says: “In the past, these products have been available in the UK but some of the main players have been Metlife, Lincoln and The Hartford, which are big organisations but perhaps do not have the same brand presence as Axa in the UK.”

Intelligent Pensions technical director David Trenner says: “These types of products have two problems - the cost of guarantees and limited equity exposure. We have not seen details of the Axa charges but if you are going to pay up to 2.5 per cent as a guarantee charge, you really need a pre-tty aggressive portfolio to have any chance of covering this charge together with the other product charges but then they limit equity exposure to stop you doing this.”

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