Phoenix Life has this week proposed a new scheme to allow policyholders to boost their fund values in exchange for guaranteed pension rates.
The closed with-profits fund offers many of its members a guaranteed pension rate (GPR), but says this limits its investment prospects and wishes to consult with policyholders on a proposed change.
GPRs offer members a guaranteed rate of income, often significantly more attractive than many offerings in the open marketplace, but they also carry a number of compromises.
Policyholders with a GPR may only be able to opt for a single life annuity and will often have to stick to a rigid retirement date with no access to a tax-free lump sum.
GPRs also require a considerable amount of shareholder capital to be tied up in keeping the fund solvent, and may prevent it from choosing more adventurous investments.
Phoenix is consulting with policyholders on allowing them to give up their GPR in exchange for shareholder capital being invested in assets which could improve final fund values.
As well as potentially boosting a pension saver's pot, the proposal would also give policyholders greater flexibility to choose a retirement income for their individual circumstances.
Fraser Heath Financial Management, an IFA specialising in with-profits advice, says Phoenix is offering a good deal to consumers.
"This really does look like a win-win situation for policyholders and Phoenix Life Group. It relieves both the company and the policyholder of the shackles that exist for both in the present position," says Miles Hendy, CFP at Fraser Heath.
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