Mercury Life is launching a fund for people in phased retirement or income drawdown schemes designed to win £25m of business.
The Mercury Life Pension Protector Fund will invest a minimum of 92 per cent in long-dated gilts with the balance invested in options which will outperform gilts and equities.
Mercury Life retail director Roderic Rennison says the fund is targeted at investors within five years of retirement. It is based on a similar institutional fund run within the group.
He says: "It may have a profile not dissimilar to a cautious managed fun. It is not a substitute for equity investment but it is an alternative for those investing in gilts."
He says the fund allows investors to have some equity exposure. But it also provides them with a high degree of protection should annuity rates prove volatile because it invests the bulk of assets in gilts.
The fund has a minimum investment of £25,000. There is an initial charge of 5 per cent plus a maximum bid/offer spread of 5.2 per cent. The annual management charge is 0.9 per cent.
Rennison says Mercury expects to attract at least £25m to the fund in the first year primarily through IFAs.