View more on these topics

Half of pension holders would consider income guarantee

Almost 50 per cent of people would consider a guaranteed retirement product if they knew it were an option, according to Aegon.

The provider found that this figure is shadowed by the 98 per cent of people who would pay a premium for cover on their holidays, pets, white goods, and mobile phones before they consider covering their pension income.

Aegon product director for unit-linked guarantees Colin Bell says: “Our research shows that nearly a quarter of people are paying more than £1080 each year insuring things but the research suggests that people don’t know they can also insure their retirement income.”

Its research also found that while many people would not opt for retirement income protection, 30 per cent of people who have yet to retire are most worried about running out of money once they reach retirement.

Bell says: “We need to do more to educate consumers on the benefits of insurance – retirement income is fundamental to providing a good standard of living in later life.”


News and expert analysis straight to your inbox

Sign up


There are 3 comments at the moment, we would love to hear your opinion too.

  1. David Trenner - Intelligent Pensions 19th November 2009 at 6:33 pm

    As someone pointed out recently when you insure your house it does not lose value, but if you insure your pension you have to reduce the equity content, thereby reducing the potential for growth.

    Of course people want guarantees, but not at the cost charged by unit linked guarantee providers.

    Someone who wants to insure all of their pension should put all of their fund into an annuity. Someone who wants to insure half of their pension should put half of their fund into an annuity and the other half into drawdown.

    And the FSA should realise that retirement income planning is a specialist area and should only allow specialists to advise on it!

  2. Variable annuities have their place as part of a wider retirement portfolio. They’re not the only answer though. However, they do provide more options at retirement, which can only be a good thing surely?

    I think Mr Trenner’s first point is unfortunately based on the misunderstanding that these types of products should provide capital growth. They shouldn’t. These are lifetime income producing financial products, not capital growth products. The fund will very likely eventually run out, but the income won’t ever fall, can only rise and is guaranteed for life.

    One point that I am interested in, and touched on in the second paragraph of the previous comment, is the cost. I’m still on the fence on that one. I’m not sure if most customers would be willing to pay the amounts involved in the guarantees. Certainly, my clients I have spoken to about variable annuities have understood what the extra amount pays for. Some have gone ahead, others haven’t – but my experience is pretty 50/50. I notice there was no mention of cost in the article. I take it AEGON didn’t have anything good to say on that, so just ignored it. Shame, as we all know that’s the main barrier to sales of third way products.

    I disagree entirely with the third paragraph stating that someone who wants to ensure all their retirement income should put all of their pension fund into an annuity – What an old fashioned view of retirement! We all know the way people are retiring is changing. Someone may well want to guarantee their retirement income, but not want to have to annuitise straight away (perhaps if they feel annuity rates are too low to lock into at the moment, or they may fell they could benefit from inpaired/enhanced rates in the future, or they might want some potential to participate in equities – not for capital growth, but for the potential of income growth – but can’t stomach the thought of having to reduce their income at a later date.)

    The one area I completely agree with Mr Trenner is on on the need for specialist knowledge in this area – and a sound understanding of what variable annuities are, and what they are not!

  3. I agree entirely with Simon Thorne. I explain ALL options to a client whether I think it more likely I will advise them to buy an annuity or whether I will advise them to use an unsecured pension. Having explained that I will then explain the “hybrids” available such as Lincoln/SLOC, Metlife’s, ASE’s, Living Times (Always forget whose just launched one like LT is it Ryl Ldn or Royal Liver or someone?). Anyway, the point is I explain ALL options before I ask the client there opinion, why they think that is right for them before going on to explain why I’d reccomend they do what they think or what I THINK (called advice). We have to educate our clients first before we reccomend. The one thing we cannot do is put a value on an insured guarantee, we can tell clients what the cost is, not the value, only they can tell us how much they value it. The same is true to say with the peace of mind of a guaranteed annuity and the oppossing desire for flexibility for life changes (often important to someone in their 50’s and early 60s)
    I have clients with practically every method of decumulating pension monies because I do not have preconcetions I will impose on clients other than that, provided I have educated the client and documented it, the client is ALWAYS right so long as they can LIVE WITH THE CONSEQUNCES with me being allowed to say “I told you so”.
    Some fo the companies contracts I have mentioned above I don’t like and have not used, for one reason or another, but it does not mean I will not consider them as that would mean I woudl cease to be “Independant”

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm