“One example of a blended product is Retirement Advantage’s Retirement Account. It allows the retiree, with the help of an adviser, to choose how to split assets between the annuity and drawdown. It is also straightforward, with all payments flowing into a single account. But only a limited selection of funds – about 15 – is available for investment.”
Advisers can create their own blended solutions for clients, he added, by combining an annuity with a drawdown product. This is not a single blended product, but a mix of products chosen and blended by the adviser.
Mr Kelly added: “Which solution to choose will depend on both the size of the retiree’s pot and the level of complexity they are willing to go to.
“Those with larger pots, or who desire a more tailored solution, may wish their adviser to create a personalised blended solution.
“Alternatively, retirees with financial constraints or who desire simplicity may favour a product like the one above.”
Personal choice
Kate Smith, head of pensions at Aegon, said that pension freedoms have heralded a new era of personal choice. But with that comes both opportunity and risk.
She said: “People can take responsibility for shaping their income in retirement to best suit their needs, but these decisions can be complex and it is possible that people will make the wrong choices and risk running out of money. Retirement is getting longer and more varied, so it’s vital to help people balance flexibility and security.”
Ms Smith said it was in response to this that Aegon developed its drawdown with guarantees product, Secure Retirement Income. This combines the best features of both drawdown and an annuity by giving people flexibility, with a base level income guaranteed, and access to their remaining capital if they need it. Its key attraction is that it gives peace of mind without sacrificing the advantages of drawdown.
The latest Willis Towers Watson figures show growth of around 60 per cent over the last two quarters, to reach £227m in premiums for the first time since Q2 2015.
Ms Smith said this is a strong indication that the market is finding sure footing following the pension reform.
LV= has also been at the forefront of developing blended retirement products. This includes the LV= Retirement Account, which offers advisers a full spectrum of retirement blends to meet their clients’ need. The LV= Flexible Guarantee Funds Bridge is one of its packaged hybrid solutions.
Philip Brown, head of policy at LV= said blended solutions are becoming more popular, as people are living longer.
He added: “Retirees are now opting for a mix of income flexibility and stability, and wanting products that can meet their changing needs. One particular product we have has seen an increase in demand for is our fixed-term annuity, which allows people to receive a guaranteed income for a set period, then reassess their options at a later date.
