A product that offers a guaranteed 10 to 15 per cent more than annuities plus the potential for investment bonuses is being launched to target the workplace DC market and through advisers.
Pension SuperHaven, the brainchild of Edi Truell, founder of private equity group Disruptive Capital, allows customers with defined contribution (DC) pots to transfer into a defined benefit (DB) arrangement and secure an income that has the ultimate protection of the Pension Protection Fund (PPF). The PPF will guarantee 100 per cent of benefits provided an income of with indexation of no more than 2.5 per cent is selected will be eligible for PPF compensation if it meets the entry requirements as set out in the PPF Regulations in the Pensions Act 2004.
Pension SuperHaven says its investment flexibility and targeted pricing – it is most attractive for younger annuity purchasers and avoids those over 75 – allow it to pay out between 10 and 15 per cent more than a comparable annuity reflecting lifestyle and health factors.
Truell says the provider is in negotiations with five master trusts with regard to them offering it as a decumulation option to their members. New government rules will require trust-based schemes to offer retirement income solutions.
The proposition is also available to individual clients through financial advisers.
Pension SuperHaven has also signed a deal with the UK’s biggest independent annuity distributor, Retirement Line.
Truell shelved his Pension SuperFund DB consolidator offering a year ago, having spent five years attempting to get it off the ground, citing delays from regulators in clarifying how profits could be taken from the arrangement. He has invested £52m of his own money in the proposition as capital, and says there is political support for this new proposition.
The proposition also has a capital preservation option, where relatives can be refunded on death, but with a lower starting income.
Some industry commentators have questioned whether the proposition has the approval of regulators and government.
Truell says: “We have worked out how to transfer DB into DC. This originated from Henry Tapper coming and asking how to put the people taken out of the British Steel scheme back into DB.
“The PPF know we aren’t posing a risk. They know my track record of supporting distressed DB schemes. Politicians generally love it.
“The product is only marketed through master trusts, GPPs and for individuals where they are getting full financial advice.”
Robert Reid, director, Syndaxi Financial Services says: “I would be very cautious about this product and would want to see a clear statement of approval from the Pension Protection Fund that they think this structure is OK. I don’t think the FCA can stay quiet here either. They are moving into retail without retail protections.”
A PPF spokesperson said: “The Pension SuperHaven will be eligible for PPF compensation if it meets the entry requirements as set out in the PPF Regulations in the Pensions Act 2004. If the Pension SuperHaven is deemed eligible, it will join more than 5,000 pension schemes with close to 9 million members under our protection. We will continue to work with other government bodies to determine whether PPF protection is right for this type of new offering to the market.”
An FCA spokesperson says: “While we cannot comment on specific firms, whenever consumers are considering investing in a pension, we would urge them to think carefully about the features, risk and benefits of the product they are investing in, including the protections available, and take advice where necessary.”