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The Case For Structured Products & Retirement


The option of saving for retirement through structured products hasn’t received the most positive press over recent years.

The option of saving for retirement through structured products hasn’t received the most positive press over recent years. But, the case for investing in the derivative-based products once someone is no longer receiving a regular income past retirement age is getting stronger. And now, we have a full service calculator to aid investors and advisors along the way. Well, in Germany anyway.

The product is the brainchild of the Deutsche Derivate Verband, the German structured product association. It has developed the calculator to allow investors and advisors to simulate the performance of an existing certificate as a retirement saving.

The investor or advisor would do this by entering the structured certificate’s ISIN and the parameters such as the amount they wish to save on a monthly basis and the length of the investment they wish to make. The calculator would then provide the amount that would have been saved in the past in that particular certificate and whether it met those particular parameters. The user would also be provided with details and data on current types of retirement saving plan structured certificates and issuers.

DDV launched the calculator to create awareness for the suitability of structured certificates as a retirement saving, not as a replacement for investment consultation. In Germany investors predominantly invest in life insurance policies as a retirement saving since such products are favored under the country’s tax system. The calculator aims to make investors aware that there is an alternative investment available to them. “We believe that the savings calculator can serve as a useful aid to realise the benefits certificates can offer as part of a well-balanced retirement portfolio,” Lars Brandau, managing director of the DDV in Frankfurt, told Derivatives Intelligence.

The development is likely to raise interest globally, at a time when issuers have been aggressively marketing structured products as retirement saving investments. They’re trying to overcome the negative press following the bankruptcy of Lehman Brothers. In the U.K. for example, officials note that there are some investors who have still not moved on from the compensation claims involved in Lehman-backed structured products, which largely resulted in the collapse of issuers including NDFA and Defined Returns Limited.

In terms of innovative and useful tools to aid and further develop investors’ knowledge of structured products following the Lehman collapse, the U.K. has largely remained behind other European countries. In Switzerland, investors can take an online knowledge test; have access to a product categorization tool and also a risk figure that is attached to structured products. In Germany, like Switzerland, investors also have access to a structured products map and credit spreads of issuers.

Structured product officials say there are more educational products to come in Europe and that it shouldn’t be a surprise therefore if the calculator and other tools lead to a boom in retirement saving structured product investments in the near future.

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