Earlier this year, NEST carried out research following the pension freedoms introduction that found that around half of people would still like a guarantee on at least part of their pension reports IFP corporate member, Partnership. Of these, 32% said they would like to convert part of their fund into a guaranteed income, using the balance as cash (13%) or to provide other income (19%).
It is clear from this that many people would like the best of both worlds – security and flexibility. But providing retirees with both flexibility and security in a single proposition requires a new generation of retirement solutions. The FCA has stated that it expects new ‘hybrid’ products to be developed, combining an annuity with Flexi-Access Drawdown within a single plan. This blended approach has a number of advantages. The most significant benefit to the individual is the ability to secure a guaranteed income for life – the cornerstone of long-term financial planning – while having the flexibility to invest some or all of the remaining fund. On top of this, should a person’s circumstances change, any income left over from the annuity could be reinvested within the product. With the right product, investment fees could be very low, potentially leading to a higher future value.
In light of this Partnership has launched the new Enhanced Retirement Account (ERA) to give people the security and flexibility they need in one tax-efficient, low-cost and simple solution.
The ERA is a Self-Invested Personal Pension Plan (SIPP) comprising three core elements: a guaranteed income for life, a Flexible Investment Element and a cash account. The guaranteed income is provided by an enhanced annuity. This is a strong benefit as it is estimated that more than 60% of people could qualify for an enhanced annuity due to ill-health or lifestyle choices. And because the enhanced annuity is medically-underwritten, it could be the cheapest way of securing guaranteed income.
The Flexible Investment Element allows clients to keep surplus funds in Flexi-Access Drawdown. This offers a choice of low-cost passive funds from Vanguard, a leading name in passive investment strategies. The funds in the Flexible Investment Element can be taken at any time: as a lump sum, as ad-hoc withdrawals, or to purchase additional guaranteed income for life. The third element of the ERA is a cash account, which can be used to consolidate income payments or as a temporary safe-haven when markets are unsettled. It can also hold any unused income, protecting it from the taxman.
For more information, visit partnership.co.uk/ERA. Alternatively contact your dedicated Account Manager on: Tel: 0845 108 0443* or email: firstname.lastname@example.org