Life Trust has unveiled a new retirement product designed to help combat the effects of increasing longevity in the UK.
The Life Trust Longevity Plan is a single premium investment that aims to provide planholders with a rising income for 20 years from age 75 or 80.
This is partly funded by the allocation of extra fund units annually on planholders’ birthdays, through the redistribution of the investment funds previously held by other planholders who have died during the previous year. The plan also offers a guaranteed return of investment on death.
The money in the plan must be invested for a minimum of 10 years and then on the pre-specified income start date it will begin to pay out annual payments. These will start at around 8% of the investor’s fund in the first year, 8.2% in the next year, rising to 100pc in the final year.
Money will be invested into a choice of nine funds to suit the investor’s risk profile from houses including M&G, Jupiter and New Star selected using OBSR.
The plan is treated for tax purposes as a Purchased Life Annuity and is held offshore in Ireland so the interest on the investment is tax free.
Planholders can invest any amount from £5,000 to £1m and the plan is designed to complement existing retirement provision for mass affluent clients.
It will be sold through IFAs with firms including INPartnership, The Falcon Group, Bates and Sage already signing Terms of Business with Life Trust. The initial charge on the fund is 5% and the AMC is 1.75%. Both fee and commission based (3% initial) remuneration options are available for IFAs.
The launch comes in response to alarming longevity figures such as those from Watson Wyatt which show a person living to 55 today has a one in two chance of living to 90 and a one in four chance of living to 95. However, few people have made financial provision for living longer.
Commenting on the launch, Andy Briscoe, Life Trust CEO, says: “Unless people invest more for their longer life and financial solutions are launched to meet this need then there will a very big issue to meet in the future. This is a new category of financial product and a new and powerful product for retirement planning.”
Life Trust is a newly established company specialising in the financial issues arising from longevity. It is financially backed by JPMorgan, The Royal Bank of Scotland and US hedge fund company D.E.Shaw group. Vertex Financial Services has been selected as its service delivery partner.
Life Trust has also launched a charitable Foundation which will work to raise public awareness and understanding of increasing longevity and encourage them to plan ahead.IFAonline
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Alongside Barrett, Hopkins, Boston and Thorman on 17 October