Investors in the Lifetime Income Fund will have until April 27 to either cash-out or move to a successor product launched by the group late in March.
As reported previously, the Ralph Stewart-founded Lifetime was forced to close its guaranteed income fund to new investments in January after failing to raise further regulatory capital as demanded by the Reserve Bank of NZ (RBNZ).
In a letter to clients, Lifetime says the existing guaranteed fund will wind-up on May 5 with investors facing an April 27 deadline on whether to transfer to the new product or sell down their holdings.
“If we do not receive your preferred option before the Tuesday 27 April 2021 we will automatically apply Option 2, and you will receive your account balance less tax, fees and expenses upon wind-up, and your future income payments will cease,” the letter says.
The new Lifetime product – dubbed the Retirement Income Fund – follows a similar underlying investment strategy as the now-closed fund but without the insurance-backed guarantee (or the premium costs).
“Regardless of the option you select you will receive a fair supplementary payment to recognise the loss of the income guarantee,” the letter says. “The value of the supplementary payment is currently being considered by the RBNZ supported by independent legal and actuarial advice.”
Lifetime has created a number of tools for clients to compare the options online based on individual account balances (as at March 12) as well as various avenues to seek further explanations or advice.
The letter says the Lifetime board, chaired by Diana Crossan, “considered increasing insurance premiums, moving to an alternative capital structure and working with a new Insurer” after failing to raise the RBNZ-directed increase in regulatory capital.
Ultimately, though, the Lifetime directors decided the best course was to wind-up the guaranteed fund while creating the new product that continues to offer “a regular, tax paid, income for life”.
According to the letter, the RBNZ requested the higher capital measures due to risks associated with “current low interest rate environment, together with heightened market volatility and the uncertainty of covid-19”.
Stewart says in the letter: “We never anticipated you would have to make a decision like this in your time with us. We do recognise the wind-up of the original Lifetime Income Fund and removal of the guarantee is challenging.
“We are committed to providing an income for life for the retirement community. We have explored all options to replicate the benefits of the original Fund and believe we have developed a new Fund that meets our original aspirations.”
Lifetime had accrued about $140 million in the guaranteed fund including $13 million raised via a mirror product embedded in the Simplicity KiwiSaver scheme.