MGM Advantage Annuity Index April 10

ANNUITY RATES CONTINUE TO SHRINK, SAYS MGM ADVANTAGE

Those in retirement need greater exposure to stock markets to offset falling annuity rates

April 2010. The MGM Advantage Annuity Index, which tracks the income paid on standard and enhanced annuities, reveals that rates have continued to fall over the last quarter, albeit at a slower pace.

Between December 2009 and March 2010 annuity rates fell 0.58%, compared to 1.64% between June 2009 and November 2009. The average rates on standard annuities fell by 0.50% in March compared to 2.16% in November, and on enhanced by 0.65% in March compared to 1.33% in November.

Craig Fazzini-Jones, Director at MGM Advantage comments, “We expect that annuity rates will continue to fall for some time, especially with the introduction of new regulation such as Solvency II that could reduce rates by up to 20%. We strongly believe that those approaching retirement need to consider maintaining exposure to the stock markets in order to potentially generate better returns and negate the impact of inflation. Our recently launched Flexible Income Annuity allows exactly that – an element of investment risk and an enhanced level of income through retirement.”

With regard to standard annuities, the difference between an average standard and enhanced annuity rate has remained near on the same at 22.7% for men in November to March and 22.6% for women. For the first five years of retirement, this would mean a difference of £3,663.30 for a man buying an annuity with £50,000, and £3,404 for a woman.

£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	£3222.85	£3955.51	22.7%	£3,663.30	£12,455.22
Women	£3016.86	£3697.67	22.5%	£3,404.05	£13.616.20

Further highlighting the importance of shopping around for the best possible annuity rate, the Index also reveals large disparities between the income paid on top quartile and bottom quartile products for both standard and enhanced products.

On a £50,000 pension pot, MGM Advantage warns that on average men who chose a bottom quartile enhanced annuity could find themselves £2,297.60 worse off over the first five years of their retirement. The corresponding figure for women would be £2,237.40.

Across the standard and enhanced annuity market as a whole, the difference between the top and bottom quartiles continues to widen for men but has reduced slightly for women. In November, the average difference for men was 34.7% and this rose slightly in March to 34.9%. The corresponding figures for women are 34.12%% and 33.8%

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	£3,485.91	£2,931.19	18.9%	£2,773.60	£9,430.24
Women	£3,246.00	£2,739.70	18.5%	£2,531.50	£10,126.00

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	£4,122.05	£3,662.53	12.5%	£2,297.60	£7811.84
Women	£3,874.56	£3,427.08	13.06%	£2,237.40	£8,949.60

Craig continues, “As rates continue to fall, it is imperative that people approaching retirement shop around to find the best solution. People work so hard to build-up a pension pot over their working lives and they should not let all this hard work go to waste. We want to see that they are getting the income and lifestyle they deserve in retirement.”

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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 17 years in the case of men and 20 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.

For further information
Citigate Dewe Rogerson
Sophie Woodcock 020 7282 1072
Jo Skinner 020 7282 1092

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 financial advisers 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 feels they haven’t receive the level of service they expected.

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