Metlife Retirement Portfolio

cgzz

Just wondering if anyone else has any knowledge/experience of the Metlife Retirement Portfolio in particular the "Income Guarantee" (see here:- http://www.metlife.co.uk/individuals/retirement/rp/index.html#how_it_works

Is it good, bad, indifferent? Any comments? Is it the only product available with such guarantees?
Thanks.

dunstonh

Not a fan personally. Too expensive for what it does. I know some like it but it does nothing for me.

martinwh

I'd avoid this smoke and mirrors sales pitch like the plague.

The sales headline pitch that MetLife lead with is '70% Equities with a Guarantee', which sounds very attractive.

For this, you pay a whopping circa 3.5% per annum by the time the IFA has taken his renumeration.

What Metlife are not quite so quick to highlight is that the '70% equity fund' can have the equity content reduced and the fund could end up being largly cash and bonds. In fact the '70% equity fund' is current sat at just 35% equity, 35% cash and the rest in bonds.

Also tucked away in the T's and C's is the caveat that Metlife can increase the charges for the guarantee for new and existing policyholders. Another one tucked away is the fact that Metlife can put a stop on people exiting the fund for up to 6 months if in their opinion it is in the interest of other policyholders.

In short if markets fall and volatility increases, the cost of providing the guarantee goes through the roof. If Metlife were to be in a position that the guarantee was too expensive you could find yourself paying 3.5% (ouch) per annum for a cash fund, plus the charges could be increased and you could be locked in.

This is a Guaranteed product for as long as Metlife want to provide a guarantee. If markets return to 2008/2009 mayhem they have all the caveats in place to protect themselves at your expense. Something they would do without hesitation.

Also, all the caveats have been snuck in to the T'c and C's fairly recently.

User56

Again, avoid like the plague

Our ex IFA convinced us to put almost all our pensions in to the 'Income Guarantee', I have regretted it ever since. The 'guarantee' relates only to the Metlife draw-down pension, your fund is not guaranteed, will be exposed to market falls, and will carry very high charges of over 3%. And in my view the Metlife pension to which you are forever locked in to (if you want the 'guarantee') is not competitive, (compared to other draw-down or annuity based products on the market) and not really guaranteed as Metlife can alter the charges and other conditions at any time.

I am currently trying to extract our funds but the penalty to do this, after over 2 years, still stands at around £15,000; basically the un collected claw back on the initial commission paid to the ex IFA, (he also gets .5% trail commission).
My advice is to be very careful before taking on any of these complex ‘third way’ products. Ask your IFA exactly what he will get from the deal, what experience he has with Metlife, and what cheaper products offering similar risk profiles are also available.

cgzz

Thanks everyone for the replies. Backs up my suspicions that what looked on the surface to be "too good to be true" should be avoided.

Ribin

Having listened to the advice on this forum I am now consulting my third IFA as to where to place my £580k pension pot. My goal is to maximise income over the next 10 years (before other pensions come on stream) whilst maintaining a minimum income guarantee of £11k from this pension pot, whilst of course hoping I can do better from the market.

I am resurrecting this thread as one of the products under the spotlight is the Metlife Drawdown Pension with guarantee alongside the MGM Flexible Income Annuity.

Having read the above thread and the warnings about the ability to change the charges, I dug into the T & C's but the poster was clearly not referring to the Drawdown Pension, as all charges are fixed on entry and cannot change so Metlife cannot suddenly make the contract more expensive. This includes all product charges (AMC and Guarantee charge).

I also noted that DunstonH (whose opinions I value) made the comment that the product is too expensive for the benefits. Yes it is with a .95% guarantee charge but as of yesterday they increased their deferral rate from 3.5% to 4.25%, which clearly improves the package but does it represent good value or are there better schemes out there?

Any opinions or experience of the product would be appreciated as well as any experience with the MGM Advantage flexible income annuity.

Lastly for anyone interested in the Americanised sales pitch, this video gives the bare bones of the Metlife scheme - certainly lots of smoke and mirrors! http://www.metlife.co.uk/intermediaries/resources/videos/sio.html

jamesd

Ribin wrote: »

Having listened to the advice on this forum I am now consulting my third IFA as to where to place my £580k pension pot. My goal is to maximise income over the next 10 years (before other pensions come on stream) whilst maintaining a minimum income guarantee of £11k from this pension pot, whilst of course hoping I can do better from the market.

Then you can forget this product because you have no need for it.

Your plan is to take an income of just 1.9% of the pension pot value. 5-6% is achievable without excessive chance of even draining the capital and if you're using income drawdown with no inheritance maximising objective you can do that as well to boost the possible income.

Here are some trivial options you could take that don't require this product and high charges on the whole pension pot:

1. Take a 25% tax free lump sum and place it in savings accounts. Take the maximum GAD-permitted income from the pension and add the part of that which is above the 1.9% income minimum into the savings account as well. In the extraordinary case where somehow your income fell well below the normal dividend yield of the FTSE All Share index - which tends to be 3% or so - you can then draw on the savings to provide your guaranteed income. But it's not really likely that you'll see the income drop so far so you really don't need so much in savings accounts. One to three years of planned income would be sufficient to protect from more realistic income drops.

2. Take a 25% tax free lump sum and gradually invest that within a S&S ISA as the limit allows. Buy a single life level annuity that pays £11,000 from part of the money in the pension pot. At age 55 this annuity would cost £221,105. Now get more clever and realise that you only have to protect yourself from the potential drop in investment income and that doesn't require assuming your investments suddenly produce no income at all. Buying an annuity that pays a few thousand would offer ample protection at much less capital cost.

3. Realise that you're being treated as a sucker because it's not credible for your income to drop to 1.9% of the pension pot size, so you don't need an extra guarantee, because just using normal investments delivers you very high confidence that you'll have 1.9% anyway. If you worry anyway, take the GAD maximum income and stick the difference between that and 1.9% in a savings account and use that to smooth the income if somehow the investments do something that is not very credible to begin with. You can do substantially better than 1.9% with a mixture of equity income, commercial property, short-dated bond funds and cash (with the cash mostly outside the pension pot, from the lump sum, to protect against GAD changes and other legislative risk).

Before buying this product, ensure that anyone trying to sell it to you tells you the history of the yields of the investments that could be used instead, so you can see from that history that you can maintain 1.9% with no trouble at all without this product.

Ribin

Thanks Jamesd some useful suggestions that I will look at after work

bmm78

In crude terms, there isn't much point paying for guarantees that you don't actually need.

From the sounds of it, you don't really need to crystallise the entire fund now, particularly if you have other pensions coming into play later on. Assuming that Flexible Drawdown still exists in 10 years time, and the Minimum Income Requirement is similar to what it is now, you should be able to utilise this in the future. With a £580k pot you could do now if you wanted, but I'm not sure if it would be of much benefit.

The drawback of taking the full 25% tax free cash is that it would crystallise the entire fund, and mean that the death benefits if paid as a lump sum (55% tax charge) are considerably worse than if you had only taken what you needed. If death benefits are an important consideration, you should definitely consider phased income drawdown, which in my opinion isn't used enough. The 55% charge only affects lump sum benefits, and a dependent's pension is paid in the same way.

From the information you have provided, I think it's more a redistribution of assets in the most tax efficient way scenario, rather than just looking for the best retirement product. For that reason, I'd be very wary of anyone trying to sell a gimmicky product, that on the surface doesn't seem to fit your needs.

I think you need holistic financial advice from a quality IFA. If that means booking a meeting with IFA no.4, it's a worthwhile exercise as making the right decisions at this time is vital.

kidmugsy

bmm78 wrote: »

you should definitely consider phased income drawdown

Hear, hear. Using a phased drawdown, you could even use the tax-free lump sums alone to cover your minimum income needs. You could then aim to draw taxable income from the fund in whatever way keeps the tax burden as small as possible.

jamesd

Ribin wrote: »

where to place my £580k pension pot. My goal is to maximise income over the next 10 years (before other pensions come on stream)

My guess based on that is that you might well be able to take £50,000 income a year from this for ten years.

But that's a guess, because I don't know what the other pensions are or how much they pay and when they start, nor your age. If you tell use more about that it'd be possible to give a better idea.

I get to £50,000 by starting at 4% of £580k - £23,200 - then adding drawing on some of the capital if the income doesn't exceed that to get the other £26,800 a year. How much you could really take depends significantly on how much the other pensions are and how much income you actually want and could use. If all the others are is the basic state pension you'd perhaps need to cut that back a bit to perhaps £40,000 total to sustain it, but I haven't properly calculated that, so don't rely on it. What those sorts of number should do is give you some idea of just how low your guarantee requirement is compared to what's really achievable. Phased drawdown would be ideal for part of this income, since it cuts the income tax bill.

I agree with bmm78 and think that you really need holistic consideration of your whole situation from now to and through death and your inheritance desires.