Glacier by Sanlam launches groundbreaking new retirement income product
09 June 2014 | Company News & Results | Sanlam | Jaco-Chris Koorts, Glacier by Sanlam
Glacier has launched the Investment-Linked Lifetime Income Plan. The solution, the first of its kind in South Africa, combines features of both a guaranteed life annuity and an investment-linked living annuity (ILLA) – thereby balancing the client’s need for market exposure with the need for retirement income that lasts a lifetime.
For the past few years National Treasury, together with the financial services industry, has been looking at the issue of retirement – with the provision of an income for life being of particular concern. If clients are tempted to take a too high income percentage, they risk eroding their capital. People worldwide are living longer, and therefore retirement savings are going to have to last longer, with the challenge of ensuring a sustainable income becoming more difficult. Clients want peace of mind that they won’t outlive their income. Given the long-term nature of retirement, it is important for clients to be invested in growth assets such as equities and property for their retirement income to keep up with inflation. It was with this in mind that the Investment-Linked Lifetime Income Plan was developed.
An overview of the product
The Investment-Linked Lifetime Income Plan removes the concern of outliving income, without sacrificing investment choice. It achieves this by guaranteeing clients a fixed number of retirement income units per year, the value of which have the potential to grow in accordance with the performance of the investment options selected. The number of retirement income units is determined by the following: the initial capital amount; the client’s age and gender; whether or not the client has chosen a single or joint-life option; and whether or not a guaranteed income payment term has been selected. The value of each retirement income unit will start at R1 and thereafter will move in line with the performance of the client’s underlying investment portfolio, less fees.
Benefits include the following:
• The biggest advantage is that the client is guaranteed an annual number of retirement income units, payable for the rest of his or her life. The risk of outliving his/her retirement capital is therefore mitigated.
• Because the income level is market-linked, the client will benefit from the ability to create an investment portfolio and enjoy market returns.
• The financial adviser can continue to provide on-going advice on the choice of the underlying unit trust funds.
• The client can make provision for income for a spouse by opting for the units (or a reduced number of units) to be paid as a regular, lifelong income to the spouse or other specified life insured after their death.
Investors who are seeking a sustainable income in retirement, coupled with market exposure and investment flexibility, are encouraged to speak to their financial adviser for more detailed information on this solution.
The video and product brochures may be accessed here.
