Prudential Annuities is offering a hybrid annuity and income-drawdown product under the umbrella of the flexible retirement income account.
The Pru says the plan enables policyholders to control their income with investment flexibility and to see how the guarantee of an income for life works.
Key features include being able to secure higher returns than traditional annuities by investing in equities, a ring-fenced proportion of the fund which facilitates higher than traditional guaranteed death benefits, as well as monthly bonuses based on the mortality of policyholders.
Once investors have taken the option to switch from drawdown to an annuity income within the account, they still have the option of drawing extra cash lump sums.
They also have three investment strategies to choose from, called adventurous, standard and cautious, which centre on 14 M&G funds and Prudential's with-profits funds. Policyholders can also make six free fund switches a year.
Pru hopes the plan, available from April 9, will take £163.1bn of the £163.7.9bn combined annuity and income-drawdown market in two years. It says the launch was partly the reason why Chancellor Gordon Brown was silent on annuity reform in the Budget.
Prudential Annuities managing director Tom Boardman says: “The product offers flexible income, investment flexibility but a secure income. It is part of moves to develop IFAs' role in the wealth management market.”
Canada Life retirement income marketing manager Peter Carter says: “This is a welcome addition but until the Inland Revenue addresses the issue of loosing death benefits to the life office, then the industry will still struggle. There will still be pressure on the Government for serious reform.”