Investors accepting need to use capital for income

Retirement Income Group, which offers the Lifetime variable annuity product in New Zealand, is nearing its fifth birthday and is expected to have $400 million of funds under management by September.

It offers a product that pays a set percentage of invested capital for life, with an insurance component covering the longevity risk.

Director Tim Paris, a US actuary and chief executive of RUARK Insurance Advisers in New York, said part of the work Lifetime had had to do was to change the perception of what an annuity was.

“An annuity is a loaded term in a lot of ways,” he said.  “Traditional annuities are highly sensitive to interest rates. There’s a perception issue that individual savers of financial advisers have, that those products are difficult to sell in a low interest rate environment. But offering an income guarantee is a different market dynamic that appeals to retirees, savers and financial advisers.”