Axa Australia is set to launch a variation of its income protection product North in order to address the longevity risk faced by the country's ageing population.
The new product offers investors an allocated pension at a guaranteed level of 5 per cent of their income base at the point of retirement for the remainder of their lives.
Like the other products already in the North stable, the new offering includes a feature where any capital gains in the underlying assets are taken into account on an annual basis, potentially giving the investor a continually increasing income base that is guaranteed.
The product effectively allows investors to transfer market and longevity risk to Axa Australia, and also lets them retain control over the underlying investments for the duration of the investment term to maximise capital growth.
While the operation of the new offering is similar to that of a lifetime annuity, there are some important differences.
"The account value is available at any point. If you want to walk away from it it's not like a lifetime annuity where you don't have that option. You can always take your money and walk," Axa Australia head of structured solutions Andrew Barnett said.
"And your assets revert to your beneficiaries on death as well," he said.
Axa Australia is aiming to make the product available to the market in the first half of 2010.
In testing the concept of a withdrawal benefit for life that the new product will provide, feedback from advisers has been very positive with 78 per cent of financial planners surveyed believing it would be appropriate for clients concerned with outliving their retirement savings.
