The product, which builds on Aegon’s 5 for Life product that launched in 2006, targets those clients between 55 and 75 who have over £50,000 of pension savings who do not want to relinquish investment and inheritance control but still want guaranteed income.
There are two guarantees built into the plan – a guaranteed income level that cannot fall and an income escalator, which allows income to increase every year if the underlying investment perform well.
Income for Life invests in nine funds across a range of risk profiles. The income is guaranteed, rather than an annuity, paid for by an annual charge that ranges from 0.5 per cent to 1.6 per cent – the lower the fund’s exposure to equity, the lower the cost of the guarantee.
The guarantee income level will depend on whether a single or joint life plan is chosen. Those choosing a single life plan who start taking income at age 60 will receive a guaranteed income level of 5 per cent for life.
Aegon UK at retirement managing director Mike Douglas says: “We recognise that people’s lifestyle patterns and retirement needs are changing as people are living longer more active lives. People need certainty of income but also want investment flexibility.
“Watson Wyatt currently estimate the UK retirement market is worth about £14 billion, and this is expected to grow substantially year on year. We believe ‘Income for Life’ and other similar retirement products are likely to suit about 10 per cent of that market and we recognise the growth potential. The concept of guaranteed drawdown products such as Income for Life is gaining momentum in the UK. We intend to make sure Aegon stays at the forefront of developments.”