Pensions Age has learned that Rockingham Retirement is to launch a new annuity replacement product aimed at the "common man".

The Retirement Income Tri-investment Account, (RITA), consists of three parts: the life settlement fund, which gives the bulk of the income; a with profits tip, provided by Prudential; and a holding account, set up with Clydesdale Bank.

Due for regional trial from November, the RITA will originally be available only to Rockingham Retirement customers. A national rollout is scheduled from April 2010.

Steve Hunt, managing director at Rockingham Retirement, told Pensions Age that people were looking for the "silver bullet" in retirement, something that the RITA could provide.

"The main concept is that it is completely free - every aspect is free, everything within the wrapper is free. If you want to switch funds, other than investment charges, it's free," he said. He added that as annuities were never designed to be used over a period of retirement longer than around five years, RITA was therefore being marketed as a "ten years annuity replacement product".

Hunt said that complexity and cost are the two big issues when it comes to products, and he believes RITA solves these. He acknowledged that these kinds of products traditionally have a bad name, but said Rockingham Retirement has put the product through thorough due diligence.

Because there are no charges, Hunt explained that the RITA in its simplest form can take pots from as little as £3,000 in the life settlement fund. This arm, for example, promises an annual return of 9.5 per cent, payable as a quarterly coupon. Costs will be kept down further as the whole system will be launched with an e-application form, and Hunt said the firm is looking to take this technology to the next level with e-signatures.

There is, of course, an element of risk with the product, but Hunt said that even a "doomsday disaster scenario" would see investors receive only 9.5 per cent over a ten-year period - effectively giving them a return of 95 per cent over the full term. The decision to include a with profit arm in the SIPP was borne out of Hunt's belief that it is a "strong" place to invest. "The [Prudential] tip started in 1999, giving it provenance there already. People who invested then have averaged 5.5 per cent.
That tip went through two of the worst crashes in that time, and has still achieved 5.5 per cent on fund. Now people have the opportunity to go into the tip when it is rock bottom."

Hunt concluded that Rockingham Retirement is also looking to launch a fully guaranteed life settlement fund, which "will plug the gap as a true annuity replacement".

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