By Susan Hely,
, November 2009
No-one wants to run out of money when they are old. But plenty of people do – particularly if their investments are hammered by volatile markets.
The financial services industry has been busy coming up with “guaranteed” lifetime income products for retirees who want to sleep at night.
ING is the first to launch a product that addresses longevity risk so you don’t outlive your retirement savings.
ING’s MoneyForLife uses “dynamic hedging” to provide regular, guaranteed income for life, regardless of the market’s performance. It will be followed by other longevity risk products from AXA and Macquarie in the first half of next year.
ING’s market research showed the global financial crisis had forced a shift in people’s attitudes to financial risk. Security planning in retirement is now essential, according to Harry N. Stout, ING Australia CEO.
ING found 77% of investors 45 and over would be interested in a product that guarantees lifetime income. “Australians are more financially stretched than ever,” says Stout. “People are living longer and spending more on healthcare in later years, retirement periods are longer than ever, and fewer younger workers are supporting those in retirement.”
You need a minimum investment of $50,000 (the maximum is $1 million). You buy a pension and, unlike older-style life annuities, MoneyForLife invests in the sharemarket and investors can access their money at any time, although conditions apply.
It offers three different diversified funds: conservative, moderate and balanced, with different levels of defensive and growth assets.
The investment has a protected income base and pays out a pension that is the maximum annual income of 4% or 5% of the base.
The protected income base can rise when markets go up, but it cannot fall below this level. It is recalculated every two years if the market has risen. You can add to your investment at any time with minimum deposits of $20,000.
Total fee for MoneyForLife, including the guarantee, platform and investment management fees, is 2.75% to 3.15%.
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