AXA Life Invest have recently made a fresh attempt to capture their slice of the drawdown market with a charges conscious promotion. In an attempt to make the ongoing costs more competitive, they have a simple, one tiered pricing structure until 31st December 2015. There is no separate contract management charge, as with many other providers, they have one charge for the fund management.
AXA Life Invest are part of the AXA Group who have, €1,277bn Assets under Management globally. They have been operating in the at-retirement market largely with a Guaranteed Drawdown product (similar to MetLife), however with this move, it’s a real attempt to secure some of the more traditional drawdown market.
Since the pension reforms came into place in April, there has been a definite shift away from annuities and people are now entering drawdown with no or very little investment experience. As a result, there has been a raft of ‘automated de-risking’ funds which have come to market. These are diversified like traditional funds, however in volatile markets an algorithm automatically moves the fund from the risky asset (e.g. shares) to a more stable asset class (e.g. cash). The aim is to mitigate large downwards movements, such as the ones seen in 2007/8.
The AXA plan has similar funds run by global investors Alliance Bernstein which aims to reduce the downside risk. The cost for both the AXA platform and the fund come out at a very competitive 0.5% before financial adviser charges, so expect to pay around 1% for the plan all in. By entering the plan during the promotional period before 1st Jan 2016, investor can save up to 0.55% annually.
The AXA plan also has a unique ‘Protect 75’ add-on which protects the fund from any market falls if you die before age 75. It provides protection again a drop in the fund from the original investment, less any income taken up to age 75. The Protect 75 is available for an additional 0.15%.
We think this is a good move from AXA who were somewhat overshadowed in the traditional drawdown market by the other major players. This may change things. The AXA plan is only available through financial advisers and not directly.