Investec has launched a structured product specifically aimed at the pension freedoms market as an alternative to an annuity.
The FTSE100 Retirement Deposit Plan 1 offers guaranteed income payments, with capital repayment at the end of the term depending on the FTSE growth.
The six-year term has two income options, of 5.25 per cent or 4 per cent income annually. The first option aims to return the full deposit if the FTSE 100 is higher than 90 per cent of the start level, while option 2 needs the FTSE 100 to be above 75 per cent at maturity.
The new product is intended to act like a fixed-term annuity, offering a regular income and some return of capital over a short time period. The product can only be bought in a Sipp.
Gary Dale, head of intermediary sales at Investec Structured Products, says that while only offering the products via a Sipp will mean there is a smaller market for them, he expects them to become very popular.
“They are an alternative to a fixed-term annuity, with a twist,” he adds.
“In today’s financial environment of low interest rates and low Gilt yields, it is more and more important to be able to ensure that capital lasts longer and retains its power to provide long-term income throughout the period of retirement.”