Lifetime Income launches
Advisers who have signed up to distribute the new Lifetime Income Fund variable annuity are mostly running financial planning-style businesses with long-term relationships with their clients, the Retirement Income Group (RIG) says.
Friday, January 29th 2016, 9:00AM
by Susan Edmunds
Lifetime has officially launched today, although it has been signing up advisers and investors since being granted its license by the Reserve Bank in December.
One investor is receiving income already and three are going through the process.
Managing director Ralph Stewart said there were now 120 authorised financial advisers signed up to distribute the product.
Banks, insurance companies and retirement villages would also operate as distribution channels. RIG is also talking to a defined benefit pension scheme that is being wound up about the prospect of offering members its product instead. There are about 80 others that it could also be a fit for.
Advisers can receive up to 0.2% commission on clients' account value for as long as the money remains invested.
The mininmum investment is $100,000 and the maximum is $1 million.
Those who start taking an income from the fund aged 65 to 69 can expect 5 per cent, after tax, of that $100,000 for life.
Aged 70 to 74, the return is 5.5 per cent, for those 75 to 79 it is 6 per cent and between 80 and 85, it is 6.5 per cent.
The payments are drawn from capital each year.
But when the capital runs out, the payments continue, funded by RIG-operated insurer Lifetime Income, to which investors pay a 1.35 per cent per year premium.
Unlike traditional annuities, the invested money is held in the client's name. They benefit from any investment returns because they can withdraw money from the fund and any that is left when they die is returned to their estate.
When interest rates go up, the income rate investors receive does not change but they benefit because the amount of capital in their fund increases,
Most of the fund's investment activity is done through its balanced portfolio but its commitments to investors, expenses and premiums are met from the cash portfolio.
The funds are to be invested with Vanguard, NZX, Harbour and ANZ.
Stewart said the product was designed to take care of the income component of a retiree's portfolio and would become a supplement to NZ Super. He said clients should not put all their available money into the fund.
Stewart said the goal was to have $80 million invested within two years.
Chief operating officer Rhys Gwyilym said Lifetime appealed to advisers who were operating as wealth managers rather than those who were more sales-focused.
It suited those with long-term relationships with their clients, he said. Gwyilym said the challenge was to be able to explain the product in a way that clients would understand without it becoming too technical and confusing.
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