Lifetime lowers investment bar

Lifetime Retirement Income is lowering the amount that people need to invest in its variable annuity product, a move its managing director, Ralph Stewart, says is in response to market demand.

Monday, May 22nd 2017, 9:10AM

by Susan Edmunds

Lifetime has released a number of changes.

It is the first variable annuity product provider in the country. Investors are guaranteed a set rate of income through their lives, which includes the drawdown of their invested capital. If there is money left in the fund when they die, it is returned to their estate. Lifetime has an insurance product to manage longevity risk.

The change include a new income rate based on an individual’s exact age when they invest. It has previously offered income rates in five-year bands, increasing by 0.5% with each band. People aged between 65 and 69 when they first started to take an income from Lifetime could expect 5% after fees and taxes and those 70 to 74, 5.5%.

But now it will offer a rate for each year of age, increasing by 0.1% for every year older an investor is when they start receiving payments.

It will also start to offer joint investments for couples, so if one partner dies, their Lifetime Withdrawal Benefit moves to the surviving partner for the rest of their life. Stewart said the income calculations would be done on the basis of the youngest partner’s age.

The minimum investment has been lowered from $100,000 to $25,000 and the minimum investment age to 60. Someone who starts drawing money down at 60 will receive 4.5% of their sum each year for life.

Stewart said investors had wanted the option of investing less. Originally, the minimum amount had been set with the intention of delivering at least $100 a week for every $100,000 of capital invested. “The marketplace told us $50 was of interest so we are responding and lowering the minimums.”

Stewart said all the changes made were in response to demand from investors and those considering the product.

He said his customer numbers were now “not too far off 100” with assets under management of $17m. Three recent applications had been from existing clients who wanted to put more money in, he said.

Stewart said Lifetime was now “past the point of no return” – it had had a stop loss on its investor statement that allowed it to pull the pin if the project had not worked. That has now been removed.

Stewart said he was in the process of taking over an existing annuity book from an insurer, but was waiting for approval from the Reserve Bank.

One of his investors, Grant Cushman, said he had been waiting for a viable annuity product to enter the market, and Lifetime provided a level of security he wanted.

It was part of wider diversification of his portfolio. Cushman said he would not have taken the option of a smaller investment sum, had that been available when he signed up.

Tags: Retirement Income Group