The MetLife retirement portfolio is a flexible product in that it features a deferred Sipp option and drawdown facilities, but it is being marketed on the basis of its guarantees. The company believes it is the first pension product to offer income and capital guarantees and says price is no barrier to protecting equity growth. It has striven to make the charges for the guarantees as competitive as possible.
MetLife’s guarantees are accessed through eight secure capital funds and eight secure income funds. Each range comprises four actively managed funds and four index portfolio funds tailored towards four risk profiles – defensive, conservative, cautious and balanced.
These funds protect investors against falling markets, lock in gains every three years where markets have risen and, in the case of the secure income funds, guarantee an income for life. Income guarantees are available to investors who want an immediate income and to those who prefer to delay taking an income.
Investors cannot select income and capital guarantees at the same time, but have the ability to switch from one to the other. MetLife says the capital guarantees are designed for younger people who are building up their pension pots, while the income guarantees are designed for older investors who need an income or who are going to need one soon.
The cost of the secured portfolios increases the higher the risk profile of the fund, ranging from 0.55 to 1.6 per cent for capital guarantees and 0.5-1.75 per cent for income guarantees. An annual charge for the pension wrapper of 0.4-0.55 per cent a year will be added but no initial charge will be payable unless IFAs take an initial commission this way.
The retirement portfolio also provides access to five managed portfolios, five index portfolios, six index funds and 39 externally managed best of breed funds. The Sipp option widens this choice further to all investments allowed within the Sipp rules.
This product could be a useful alternative to annuities and unsecured personal pensions. Its guarantees may provide peace of mind for investors who worry about the impact of unpredictable equity markets and rising inflation on their pensions at a reasonable cost. However, investors who switch out of the secure portfolios cannot switch back in again for six months.