Allianz Global Life is introducing a new type of pension investment into Ireland, targeting risk-averse investors.
It marks the German giant’s first step into the Irish pensions market although the company has been based in Dublin and selling into other European Union jurisdictions for a number of years.
The “annually renewing guarantee option” essentially packages an investment with an insurance policy to reassure customers fearful of suffering significant losses in a market downturn.
Exposure to equities has long been seen as essential to drive growth in pension funds but wary consumers are often more inclined to opt for lower-risk investments in government bonds and cash. While these deliver safer returns, they are not likely to deliver the sort of growth that workers would hope from their investment, reducing their financial freedom in retirement.
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Allianz Global Life is offering what it calls “a carefully curated selection of investment options” which are “easy to understand, simple to monitor and designed to deliver reliable outcomes in the face of today’s market volatility”.
Essentially, if an investor’s fund falls by a certain amount, the insurance element kicks in to prevent any further losses.
So, in a case with the loss limit is set at 90 per cent, Allianz will look at the investment on the anniversary of when it was first taken out and see how it is faring. If the investment is in the black, there is no problem and the investor’s fund keeps the gain.
However, if it is more than 10 per cent down on where it was 12 months earlier, Allianz Global will add extra units to the investment to bring its balance up to 90 per cent of where it had been a year earlier.
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While the product does not entirely avoid the risk of losses, it is designed to limit them on the understanding that equities tend to outperform over the longer time frame.
The loss limit and the cost of the insurance element will vary from product to product but, in the case of the 90 per cent limit above, consumers would pay 0.75 per cent of the fund value for the insurance element. That is in addition to other more routine fund charges.
The product, which will be sold through brokers, will be aimed at individual investors saving for a pension through a personal retirement savings account (PRSA) or keeping their pension invested in the market after retirement through an approved retirement fund (ARF).
It will not, for now, be sold to occupational schemes although Allianz does do so in some other markets.
“Ireland offers a perfect setting for expansion, thanks to its forward-thinking financial culture and strong economic growth,” said Giampaolo Viseri, chief executive of Allianz Global Life. “Our approach emphasises simplicity over complexity: we provide a carefully curated selection of investment options that are easy to understand, simple to monitor and designed to deliver reliable outcomes over time.”
The company says the expansion into Ireland “marks a significant milestone in the company’s continued growth strategy”.
“The company’s well-established operational base in Ireland, combined with Ireland’s dynamic economy and increasing demand for transparent, reliable pension solutions makes Ireland an ideal location for the company’s next phase of development,” it said.
