nottheaverageactuary

Actuarial news and views from Cape Town and beyond

Liberty Agile Retirement Annuity

5 Comments

About sometime towards the end of 2015, Liberty aired an advert/ launched a product  which  according to my knowledge with regards to pension schemes is a combination of Defined Contribution(DC) and Defined Benefit, which guarantee an Income benefit while in retirement depending of how risk averse an individual is by minimizing the investment risks which the individuals can bear, but I stand corrected :). They basically split the contributions into two components and one proportion goes to the DC portfolio and the remaining goes to the DB portfolio. I thought that it would be interesting to see how they combine the two schemes.

Liberty Agile Advert

Product Brochure- For more info

Sources:

http://libertyagile.co.za/wp-content/themes/agile/dist/Liberty_Agile_Retirement_Range_Brochure.pdf

 

 

Advertisements

5 thoughts on “Liberty Agile Retirement Annuity

  1. I always thought this was just a DB fund based on the radio & tv adverts, but I see now that it is actually a split between a DB and a DC fund. They also advertise it as a “first” because of the guaranteed income.. but DB funds are old news!?

  2. So this is actually really interesting. It’s not quite clear that you would actually call it DB – part of the definition of DB is that the employer takes up the variation in performance, and in this case there is no employer.

    But what it is called is not as important as what it does. It seems that this is basically purchasing a deferred annuity many years in advance. The idea is to eliminate investment return volatility from the pre-retirement investments (mainly by buying super-safe assets like govt bonds and holding them to maturity) and eliminating post retirement risks as well (not sure how they are doing it but one of the interesting features is that they reserve to change your income if “significant advances in mortality” are made).

    The guaranteed rate of return that you are effectively earning on your investment is around 6.9% (net of fees) which in an environment of 6% inflation is ridiculously low (only 0.9% real). So you could say your income is guaranteed, but it will be much much lower than the possible worst case scenario in a long term market investment… Liberty acknowledges this by saying the product is not suitable for long term investors.

    What risks do you think a person takes on when they use the Exact Income portion of this product?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s