Zurich to launch drawdown with deferred annuity


Zurich is to launch a blended product that puts customers into drawdown as well as a deferred guaranteed income.

The advised-only product is due to launch in 2016.

Customers will place the majority of assets into drawdown for the early part of their retirement, while some funds will be set aside to purchase a deferred annuity-style contract to kick in at a pre-determined age.

Charges have not yet been finalised but the drawdown portion is likely to follow the fees on Zurich’s advised platform.

These are: 0.35 per cent on the first £99,999.99; 0.30 per cent on the next £150,000; 0.27 per cent on the next £750,000; and 0.22 per cent on holdings of £1,000,000 and above. There is an additional £75 annual fee.

Zurich head of retail wealth propositions Mark Peters says: “We’re looking to address the very real risk that people run out of money.

“So the aim is to create a drawdown-type contract that has an element of certainty at a point in time. They can be in drawdown with all those benefits but it will have some form of stop loss insurance, if they take too much income or the market move against them.”

Peters says the firm has not yet decided what would happen if the drawdown fund is depleted before the guaranteed income starts.

Other firms’ guaranteed drawdown products – that are designed around locking in a higher minimum income – have been criticised for being expensive and giving little chance of upside.

Metlife, Axa and Aegon currently offer these unit-linked guarantees.

Peters adds: “One of the challenges some of the other products in the market have quite limited investment options, that won’t be the case with our offering.”

Example (source: Zurich)

Retirement Pot = £200,000

Client takes £50,0000 as tax free cash, leaving £150,000

Uses £15,000 of the £150,000 to secure future income from age 80/85 (the amount set aside and age the guaranteed income starts is determined by the client/adviser)

The remaining £135,000 is then invested in drawdown