Launch of MGM Advantage Annuity Index reveals average difference of 22% between standard and enhanced annuities

29-07-2009

6 July, 2009 – The launch of the MGM Advantage Annuity Index, a new quarterly initiative tracking the income paid on standard and enhanced annuities, reveals that enhanced annuities pay out on average 22% more than standard annuities in annual retirement income.

The startling findings from the Index reveal that, based on average rates, a man retiring at 65 with a pension pot of £50,000 would receive an estimated £3,575 extra for the first 5 years of retirement, or £715 each year, if he qualified for an enhanced annuity(1).

Indeed, according to MGM Advantage if the same customer lived to an average life expectancy and purchased an enhanced annuity they would benefit to the tune of £8,580 compared to income they would receive from the average standard annuity.

The corresponding figures for a woman retiring at 65 would be £3,405 for the first five years or £682 a year. If they were to reach the average life expectancy they would find themselves £11,579 better off.

£50,000 pension pot

Average standard annuity

(per year)

Average enhanced annuity

(per year)

Percentage difference

Difference over the first 5 years of retirement

Difference over average retirement

Men

£3,323

£4,038

21.5%

£3,575

£8,580

Women

£3,087

£3,769

22.1%

£3,410

£11,594

Craig Fazzini-Jones, Director at MGM Advantage comments, “Many people close to retirement don’t realise that they can shop around for the best annuity rate and increase their retirement income by thousands of pounds. Last year, over 60% of people buying an annuity chose the one offered to them by their pension provider (2). Shopping around is easy to do, especially with the help of a financial adviser.

“The other problem is that many people approaching retirement feel fit and healthy and wouldn’t consider that they could qualify for an enhanced annuity. Lots of medical conditions are covered, from the very minor to severe impairments. Indeed, there are well over 1,000 medical conditions such as high cholesterol or high blood pressure that could entitle you to a higher guaranteed income in retirement.”

Nick Flynn, Director at The Retirement Adviser, adds “To date we have written 62% of our annuity business on enhanced terms. This isn’t because we deal with more unhealthy annuitants than your average IFA, its more around our ability to really question the client when they say they are well. A basic health check before buying your annuity would reveal any minor health issues.”

Looking at the annuity market as a whole, MGM Advantage’s Index also reveals that there are significant income disparities between those products in the top quartile and those in the bottom quartile when it comes to both standard and enhanced annuities.

On a £50,000 pension pot, MGM Advantage warns that on average, those people who choose a bottom quartile standard annuity could find themselves £2,880 worse off over the first five years of retirement. The corresponding figure for an enhanced annuity was £3,710.

Women who select a bottom quartile standard annuity will find themselves £2,830 out of pocket over the first five years of retirement and £3,860 if they chose a bottom quartile enhanced annuity.

Standard Annuities

£50,000 pension pot	Top quartile average rate (per year)	Bottom quartile average rate (per year)	Percentage difference	Difference over the first 5 years of retirement	Difference over an average retirement
Men	£3,532	£2,956	19.6%	£2,880	£6,912
Women	£3,304	£2,738	20.7%	£2,830	£9,622

Enhanced Annuities

£50,000 pension pot	Top quartile average rate (per year)	Bottom quartile average rate (per year)	Percentage difference	Difference over the first 5 years of retirement	Difference over an average retirement
Men	£4,184	£3,442	21.5%	£3,710	£8,904
Women	£3,914	£3,142	24.6%	£3,860	£13,124

Craig Fazzini-Jones, concludes, “When choosing an annuity it has never been more important to seek financial advice to find the best deal for you.”

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Notes to editors:

.(1) Annuity rates are based on analysis of data from Investment Life and Pensions Moneyfacts by MGM Advantage. The analysis looked at level annuities without a guarantee and income levels are based on a pension pot of £50,000 and a retirement age of 65. To create total retirement income figures the Index multiplied annual annuity income by 12 years in the case of men and 17 years in the case of women. Enhanced rate figures are from a sample of smoker rates and enhanced rates based on health conditions.

The Index based its life expectancy figures on Office of National Statistics figures.

(2) According to the Financial Service Authority

For further information

Citigate Dewe Rogerson

Jo Skinner 020 7282 1092

Jonathan Henderson 020 7282 1057

About MGM Advantage

History: Based in Sussex, the life assurer opened its doors in 1852 as Marine and General Mutual Life Assurance Society, to fill the poorly-met insurance needs of seafarers and traders.

MGM Advantage is a new name in the UK retirement income market. Formerly known as MGM Assurance, the company repositioned itself as MGM Advantage in June 2008, when it launched a wholly-owned business unit called MGM Advantage Designs for Retirement to focus on annuity sales and the wider retirement income market. MGM has been registered longer than any other company in the UK. It is a mutual society owned by its members, and manages assets in excess of £1.4 billion. MGM Advantage’s commitment to customer satisfaction is backed up by a customer charter, which promises high quality service and ease of mind.

MGM Advantage distributes its products through independent financial advisers (IFAs) across the UK.

MGM Advantage Designs for Retirement, MGM Advantage and the MGM Assurance logos are Trade Marks of Marine and General Mutual Life Assurance Society.