Aegon has launched its new retirement solution product, Income for Life, which offers customers a guaranteed income for life and control of their investment up to age 75.

Aegon said that Income for Life bridges the gap between annuities and income drawdown products. It has been designed to meet the needs of people between the ages of 55 and 70 with pension savings over GBP50,000 who do not want to give up investment control and valuable inheritance benefits, but still want the security of a guaranteed income.

The company said that the product provides a guaranteed income for life – regardless of what happens to the underlying investment or how long the customer lives – and allows the customer to keep control of where their money is invested up to age 75. It also provides comparable inheritance benefits to an income drawdown product.

According to Aegon, there are two guarantees built into Income for Life. The first is a guaranteed level of income that cannot fall. The second is an income escalator feature that allows income to increase each year if underlying investments perform well. If the income increases as a result of positive market performance, the higher income amount is then locked in and then has the potential to grow further. There is no cap to market performance; therefore customers will participate fully in any growth.

The guaranteed income level depends on whether the customer chooses a joint life or a single life plan and when they start taking income. For those customers who choose a single life plan and start taking income at age 60, the guaranteed minimum income level is 5% for life.

Unlike an annuity, where income is paid for by pooling mortality risk, Income for Life achieves the guaranteed lifetime income by charging some amount each year. The cost for the guarantee ranges from 0.5% a year to 1.6% a year, depending on the chosen funds’ exposure to equity; the lower the equity exposure, the lower the cost of the guarantee.