MGM Advantage - Cost of Living

April 2010

RETIRED HOUSEHOLDS IN LONDON NEED £194,602 MORE THAN THOSE IN THE NORTH EAST TO COVER THE COST OF RETIREMENT

Average UK household requires £564,227 to cover retirement, says MGM Advantage
Annuity rates are falling – new research from MGM Advantage reveals that between August 2009 and March 2010, standard annuity rates fell by 3 per cent for men and 2.3 per cent for women

Households in London require £194,602 more to cover the cost of retirement than those in the North East, according to new research from retirement specialist MGM Advantage1.

Based on analysis of cost of living figures1, MGM Advantage found that twenty years of retirement will cost the average household £564,227, however this figure varies dramatically between regions.

Despite the huge and growing cost of living in retirement, MGM Advantage says that a number of factors including people living longer, the effects of quantitative easing and new regulation will see standard annuity rates fall by as much as 20 per cent over the next few years. Indeed, new research) from the retirement income specialist reveals that between August 2009 and March 2010, they fell by more than 3 per cent for men and 2.3 per cent for women.2

MGM Advantage estimates that the cost of living for a retired household in London is 18.49 per cent higher than the national average and as a result pensioners in the capital will need £668,552 to cover twenty years of retirement. For those in the North East however, the cost of living is 16 per cent below the national average and the sum required to cover retirement is just £473,951.

Region	Total cost of retirement	Difference against the national average
London	£668,553	18.49%
South East	£628,786	11.44%
East	£605,585	7.33%
Northern Ireland	£588,771	4.35%
South West	£575,884	2.07%
West Midlands	£536,467	-4.92%
Scotland	£531,214	-5.85%
East Midlands	£518,299	-8.14%
North West	£516,945	-8.38%
Yorkshire & the Humber	£508,877	-9.81%
Wales	£499,178	-11.53%
North East	£473,951	-16%
UK	£564,227

Chris Evans, Chief Executive, MGM Advantage comments: “There is significant pressure on pensioner income. Those people retiring today can expect to live for twenty years but with annuity rates falling and the cost of living rising, funding retirement is a difficult task.

“With such large regional discrepancies in the cost of living in retirement, we wouldn’t be surprised if more people considered relocating to other less expensive parts of the country in order to search out a better quality of life. They also need to spend more time on ensuring that their retirement income is working as hard as possible for them.”

MGM Advantage says that traditional annuities, with their rates falling, are becoming less appealing for those people approaching retirement or who have already stopped work. It believes that a growing number of people will need to keep more of their assets exposed to the markets - with the appropriate level of tailored protection - in order to ensure a sufficient level of income once they stop work, and that this will fuel strong growth for the asset backed annuity market.

MGM Advantage has just launched its Flexible Income Annuity, which is a new and unique asset backed annuity, giving customers the potential to receive a greater income than through a fixed level conventional annuity. The new product includes the flexibility to change income levels at different stages of retirement and the potential for growth and therefore the potential to negate the impact of inflation. It also provides a minimum income guarantee and death benefits.

MGM Advantage believes that the increased cost of living highlights the need for retirement products that can protect income from the negative effects of inflation through a degree of market exposure. It believes that there should be a radical change in the industry in order to deliver new solutions that are based on providing greater investment returns and offer greater flexibility.

Chris Evans, continues: “The sums involved in covering the cost retirement are significant, and will be even higher for those people with big plans to fully enjoy their retirement, the first decade of which can be particularly expensive. The annuity market requires innovation if it is to meet pensioners needs and we believe our Flexible Income Annuity which allows people to vary their income to meet the different stages of retirement is a step in the right direction.”

The flexibility of the product and the fact that the minimum investment is £10,000 means it is suitable for the majority of UK consumers who are willing to accept an element of investment risk on some of their pension savings, providing they have a minimum income guarantee to rely on. Low annual management charges and a simple range of investment funds to choose from will make the product attractive to a previously poorly-served group of retirees.

The new product is the first in the UK to offer access to Vanguard funds within an annuity wrapper, as well as a choice of market leading actively managed funds from Jupiter, Newton and JP Morgan Asset Management, all of which have been selected by Old Broad Street Research. A cash fund is also available from Insight Investment.

Product Details – MGM Advantage Flexible Income Annuity

A lifetime annuity that offers a choice of starting income between 50% and 120% of the income that would be available from a conventional annuity
The flexibility to vary income at key stages of retirement to meet lifestyle needs
A choice of market leading actively managed funds from Jupiter, Newton, JP Morgan Asset Management, selected and monitored by Old Broad Street Research (OBSR)
A choice of passive funds using funds from Vanguard – MGM Advantage is the first provider in the UK to offer Vanguard funds within an annuity wrapper. A cash fund is also available from Insight Investment.
Enhanced terms for customers with a health impairment
Because we’re a mutual, membership of the Society and the potential for extra income from member bonuses, without the need to invest in a traditional with-profits fund
The usual mortality cross-subsidy benefits offered by annuities but not possible with income drawdown
Income fixed for five year periods so people can plan their finances more easily
Automatic five-year income reviews, but also the option for customers to make changes to income levels and investment choices at any time if required
A Minimum Income Guarantee from day one
The option to move to a fixed income basis or to another provider at any time
Death benefits and all the other features you’d expect from a conventional lifetime annuity.
The Flexible Income Annuity is sold through independent financial advisers

- Ends -

For further information:
Citigate Dewe Rogerson

Phil Anderson                          020 7282 1031
Alistair Kellie                            020 7282 2850
Jo Skinner                               020 7282 1092
Sophie Woodcock                  020 7282 1072

Notes to editors

Based on MGM Advantage analysis of the ONS Family Spending Reports
Based on the MGM Advantage Annuity Index

About MGM Advantage
www.mgmadvantage.com

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 rebranded as MGM Advantage, Designs for Retirement in June 2008 and repositioned the company as a retirement income specialist.

Its launch product – an Enhanced Annuity – is designed to provide additional income in retirement for people with any health conditions or a poor medical history and is distributed through independent financial advisers (IFAs) across the UK.

MGM Advantage 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 an industry-leading customer charter, which promises high quality service and a £25 no-quibble payment to any customer who hasn’t received the level of service they expected.
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MGM Advantage Designs for Retirement, MGM Advantage and the MGM Assurance logos are Trade Marks of Marine and General Mutual Life Assurance Society.