In the recent past, the to-ing and fro-ing in the pensions world has given us lots of opportunities to talk about offshore.
Pensions simplification (A-day) was a great one. It gave us opportunities to talk about using offshore for those who are unable to put more into pensions – those who went for enhanced protection.
This is nothing to do with the strength of Richard Hammond’s helmet or that young children now have to sit in booster seats. Then, of course, there’s the unwilling – those who don’t want to put more into pension as they may want to take benefits before 50 (or 55 if you are reading this after 2010 - not too much chance of that) or want to take the benefit as a lump sum.
One issue that is continually being talked about in the pensions world but not much in the investment world, is the length of time you are likely to be around once you’ve retired. This is obviously a big issue for pension schemes as they have to make sure they have the funds to cope with our ever improving mortality experience.
But what about the investment world? Well, this translates to the issue of “will I live longer than my assets”?
We’ve been looking at some figures recently. Did you know that, according to stochastic simulations conducted by Barrie & Hibbert, there’s a greater than 1 in 3 chance of a 60-year-old male running out of money before he dies if, for example, he invested his money in a typical 50% equities, 50% fixed interest fund via an onshore bond and takes 5% withdrawals each year? And it’s a 40% chance for a 60-year-old woman.
So what are the messages for offshore investing? Well, just like the pensions schemes it’s about investing more (or at least earmarking more of current investments) for retirement provision.
I suppose if there was a product that allowed you to invest in funds which linked to potential growth in equities and fixed interest, guaranteed to pay an income for life from age 60, irrelevant of the performance of those funds, gave you death benefit of at least your original investment less income paid (although this could be zero), allowed you access to your money and could increase the income with growth in the fund, that would be good wouldn’t it?
The writer offers a bottle of champagne to the first to identify what on earth I am talking about. Using the information on an excellent site like IFAonline may help!
Steve Whalley is head of investment products marketing at Aegon Scottish Equitable.
The views expressed are those of the author and not those of the company he represents.IFAonline
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