As a financial adviser for the last 30 years, Frank Cochran of Celebrity Financial Planning Ltd and FSC Investments Ltd, is often asked to comment on how the general public perceive the current market conditions. Rarely in the last 30 years has Frank ever encountered so much fear and trepidation emanating from the basic high street saver. Surprisingly, there is an unbelievable reluctance to move money away from the very institutions that have caused this atrocious mess. We have all heard the anecdote ‘never bite the hand that feeds you’; well Frank’s twist on this is even better as he believes we should “Stop feeding the mouth that bit you”. Investors often rely on deposit and savings accounts to provide them with an income especially in retirement – but with interest rates at a record low, Frank suggests that it is important to take a closer look and to check out the 5 for Life from AEGON Scottish Equitable International.

What affect do lower interest rates have?

Falling interest rates may benefit some borrowers but they’re having a damaging effect on savers. This is particularly problematic for pensioners who rely on interest from their savings to supplement their income. The average savings account offer 0.83% interest (source:, March 2009).  The effect of tax reduces this rate further – to 0.67% net for a basic rate taxpayer and just 0.5% for a higher rate taxpayer.

Although it is difficult to compare to a bank account, 5 for Life from AEGON Scottish Equitable International is designed to provide investors with a guaranteed minimum income of 5% of their investment for life. Please note that the tax on income, if any, depends on the client’s gender, age and when they start to take income.

It’s not only low interest rates that are a problem. There’s a real danger that savings could run out if your clients are taking regular income.  If the savings run out, so does the income.

How long will the income need to last?

More people than ever are living longer.  For example, a 60 year old man has a 50% chance of living to 89, whilst a woman of the same age has a 50% chance of living until she’s 91. Making sure our money survives as long as we do is difficult when interest rates are so low. Here is a reminder of the 5 for Life from AEGON Scottish Equitable International product features:

  • Clients can invest if they’re between 45 and 80 years old
  • Minimum investment is £15,000 – maximum is £1 million
  • Clients can take the guaranteed minimum income of 5% from age 60 or later
  • They can take the income monthly, quarterly, half-yearly or yearly
  • The 5% income erodes capital and the tax on income depends on the client’s gender, and the age they start to take income
  • The fund benefits from virtually tax-free growth
  • They can cash in part or their entire plan at anytime (please remember there may be a charge and it will affect the guarantees. However if they cash in the plan after the tenth anniversary there’s a money-back guarantee – either the total contribution paid less income taken, or the cash-in value of the plan, whichever is higher 
  • If the investor dies, there is either a money-back guarantee on death (the total contribution less income taken), or 100.1% of the cash-in value of the plan, whichever is higher

The only circumstance in which the guarantee would not apply is if AEGON Scottish Equitable International plc were to fail.  In this unlikely event, the benefits from the plan may be affected. As a regulated product the plan comes under the Financial Services and Markets Act 2000 for compensation arrangements.

It must also be pointed out that the Government are coming under increasing pressure regarding their fiscal policies: The recent Gilt auction initially failed to sell out as well as the fact that Mervyn King, the Governor of the Bank of England, has been so disturbed at the Chancellor and the Prime Minister’s proposed public sector spending that he has felt it necessary to ‘take the moral high ground’ by writing to the Prime Minister to voice his concerns.

A failing Banking sector, Government intervention in most of our banks, deflation in the gross domestic output figures and a depressed housing market all point to a recession/depression, which is going to force interest rates to stay low for some considerable time.  In Frank’s opinion, there is the prospect of deposit rates falling even lower.

Now is not a time for fear and complacency, now is a time for action and clear thinking, the AEGON Scottish Equitable 5 for life is a well thought out and constructed financial instrument, designed to give a lifelong interest return of 5% GUARANTEED FOR THE REST OF YOUR LIFE – Frank believes that it would be very difficult to find a deposit account that could match that!

Please note that this product may not be suitable for everyone. The purpose of this article is to provide technical and generic guidance and should not be interpreted as a personal recommendation or advice.


Celebrity Financial Planning Ltd and FSC Investment Services Limited is authorised and regulated by the Financial Services Authority.

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