Manulife Investments is launching RetirementPlus, a segregated fund product that adapts to different phases of clients’ retirement plan, on October 28. At the same time, Manulife is capping new sales of IncomePlus.
Manulife has been trumpeting its new segregated fund product to advisors since mid-September. The insurer waged a major press campaign and has organized a massive Canada-wide information tour. Rarely has deployment on this scale been seen more than one month before the official launch of a product.
“It’s a brand new segregated fund product category. We wanted to give time for advisors to actually learn the product and understand who it’s for and which of their clients fit that profile,” Steven Parker, assistant vice president, Guaranteed Investment Products, Retail Markets at Manulife told The Insurance and investment Journal in an interview.
This groundbreaking product is aimed at investors who plan to retire within 5 to 15 years. It also targets people who think that long-term interest rates will continue to rise, Parker adds.
To benefit from a potential rate increase, Manulife lets customers freeze their interest rates in anticipation of future retirement income. RetirementPlus also offers an income credit that corresponds to the market value of the cumulative savings, adjusted to the rise in 10-year Canada savings bonds plus 0.5%. This formula is guaranteed. If rates do not rise, the fund holder would still receive a 0.5% credit.
“It’s a product for those consumers who are a bit more optimistic about markets, looking for growth and that want to participate in potentially rising interest rates. They don’t want to lock-in low interest rate products,” Parker explains.
The product is not for everyone, especially the risk averse, he adds. “It’s a risk sharing model. In the future, if/when a client chooses to lock-in their payout rate, they will have the potential to earn a rate that is higher than today’s but will also take the risk that rates could be lower. I think there’s many people who have the view that in the medium to long term, rates will go up. For those more risk tolerant, optimistic clients, this product would be a good fit.” For people who want to skirt this risk, he recommends PensionBuilder, a segregated fund policy offered by Manulife Investments that resembles a lifetime annuity.
RetirementPlus is not intended to replace the guaranteed lifetime withdrawal product IncomePlus, Mr. Parker says. “It’s a new category for seg funds. It’s not a new GMWB product or a replacement product of IncomePlus. It’s a flexible accumulation product with an option for income.” (Note: A RetirementPlus product guide says that an optional lifetime annuity guarantee is available)
Clients can choose their degree of stock market exposure during the savings accumulation period. They can also decide when to begin receiving their retirement income. The product is structured in three phases: savings, preservation and income. In the first phase, clients accumulate savings by investing in different investment options. They can allot up to 100% of their assets in equity. “That’s not something that you’re able to do in a GMWB product today,” Mr. Parker points out.
In the preservation phase, clients can transfer all or part of their assets to a guaranteed fixed income fund. Finally, customers can elect to draw partial or total retirement income starting from age 50, during the income phase. This flexibility lets Manulife offer 100% equity allocation.
In conjunction with the launch of RetirementPlus, sales of IncomePlus will be curtailed on Oct. 25. “Traditional GMWB products are not selling near the levels they did in the past: the MER is high and the payouts have come down. We would have closed IncomePlus to new sales even without the launch of Manulife RetirementPlus as we believe given the economic times, the value proposition for the client just isn’t there anymore in those product designs,” Mr. Parker explains.
Customers who already have IncomePlus contracts can continue to make additional deposits to it, he says. No maximum is foreseen for now. GIF Select IncomePlus and EstatePlus contracts are not affected by this change.
The current version of PensionBuilder, which was launched in 2011, will also be closed to new sales as of Oct. 25. However, a new simplified version of the PensionBuilder will be offered starting Oct. 28.