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Product matters

The new NDF retirement and income plan is designed as an investment for pension monies within a Sipp during drawdown.

Part of the investment goes to a growth element, part to provide income, the proportions of which depend on how much income is selected. The idea being that after the sixyear term of either 3 per cent, 5 per cent or 7 per cent income, the income element is exhausted although the growth element storms through to provide a return of the amount invested in the growth element (guaranteed) plus 70 per cent of the return on FTSE 100 stockmarket index.

A growth option with 0 per cent income is also available with minimum investment £100,000.

Linking to the FTSE 100 makes this somewhat of a volatile yardstick, so NDF kindly averages the closing price over the last two years of the product.

As with all these types of product, there is no flexibility to alter income levels or the investment term. More to the point, what happens if the client needs to buy an annuity after a couple of years?

In my view, this product is totally unsuitable for drawdown or phased retirement clients.

I am not a big fan of equity bonds or with-profits in Sipps or drawdown. I prefer clients to have direct exposure to the asset classes through collectives,and accept their volatility. The most attractive version of this plan to me is the growth option but why would I want to limit a client&#39s returns by 30 per cent over six years? A tracker fund would be much cheaper and more flexible.

Danny Cox is pensions development manager at Hargreaves Lansdown

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