MetLife UK and Aviva will both launch fixed term annuity products that allow customers to take equity exposure to secure superior returns.
“There will be some investment choice for customers and that choice will be low-risk. This will not be like going into a drawdown contract where investors are exposed to all forms of equity risk”, said Darren Dicks, Head of Retirement adding that the firm will launch the low risk limited options products in the second quarter of 2011.
In contrast to a standard fixed term annuity contract where returns are fixed, the products with equity exposures allow customers to put a percentage of their pension money at risk.
MetLife has tied up with Living Time to gain experience in the fixed term annuity market and plans to launch its own products in 2012.
“This is the future for fixed-term annuities. If investors are locking their money away for five years, it is only sensible to have the potential for some growth, albeit with higher risk. It means these products will increasingly move from being stand-alone offerings to being part of a wider portfolio”, said Billy Burrows of Burrows and Cummins.