MetLife is to cut the rates on its guaranteed drawdown products, blaming a decline in long-term interest rates.
In a note to advisers, the insurer says falling expectations of interest rates driven by plummeting inflation, pessimistic forecasts for global growth and dropping oil prices mean it has to cut the terms of its Secure Income Option and Secure Capital Option products.
MetLife is cutting the guaranteed income percentages by 0.25 per cent for all ages from 7 March. Prior to the changes, a single life policy for a 60-year-old with a Secure Income Option has a 3.75 per cent guarantee, while a 70-year-old gets 4.5 per cent.
The Secure Income Option gives customers a guaranteed income calculated by the value of funds invested and the guaranteed income percentage. The percentage varies depending on the age of the investor and whether they choose a single or joint life policy.
It is also dropping the uplift customers can get by deferring income, from 4.25 per cent a year down to 3.5 per cent.
MetLife is also removing eight and nine-year terms on its Secure Capital Option due to lack of demand. The product protects the capital value of an investment for a chosen period. Customers will now have to chose terms between 10 and 20 years.
MetLife will continue accepting applications under the old terms until 27 March 2015.
A MetLife spokesman says the changes only apply to new customers or top-ups made after the cut-off date.
He says: “We believe our products remain competitive.
“Lower long-term interest rates are impacting many providers and their propositions. We are committed to ensuring our products remain competitive, offering great customer value and certainty. We plan to implement rate adjustments and lengthen guarantee terms which are modest and in line with market conditions.”