• Conventional rates have fallen by 4.70% since September 2011 and enhanced rates have declined by 2.45%
• Overall rates have fallen by a staggering 9.30% since June 2009

Latest findings from the MGM Advantage Annuity Index¹, which tracks the income paid on enhanced and conventional annuities on a quarterly basis, reveals average conventional and enhanced rates fell by 4.70% and 2.45% respectively in just three months.  The 3.7% drop in overall average annuity rates is the largest decrease since September 2010 and means rates have fallen by a staggering 9.30% since June 2009.

Aston Goodey, Sales and Marketing Director at MGM Advantage comments: “These findings are shocking and will put even more pressure on those people in or approaching retirement.  Retirees are faced with the triple whammy of making their income go further as people live longer, while high inflation erodes their purchasing power and annuity rates continue to fall.”

MGM Advantage’s Annuity Index reveals the difference in retirement income between the top enhanced annuity rates and bottom standard annuity rates for those aged 65+ with a £50k pension pot, coming to a staggering 55.2%for men and 52.2% for women.

Aston Goodey continues: “Since launching our Annuity Index in June 2009, it has fallen eight out of the nine times it has been updated.  With the continued economic uncertainty, the long term outlook for conventional and enhanced annuity rates is difficult to forecast.  This makes it all the more important to shop around for the best deal when buying an annuity as the difference between the best enhanced and worst standard rates can be over 50%.”

Further findings from the Index reveal that the average difference in the income paid between the top and bottom quartile conventional annuity rates for men is 19.41% and 21.53% for women (14.41% and 18.50% in September 2011 respectively). In relation to enhanced annuity rates, the corresponding figures are 29.91% and 24.66% (20.68% and 22.15% in September 2011 respectively).

The difference between the average standard and enhanced annuity rates is 21.36%. Over the average retirement, this would amount to £10,739.92 for men and £11,719.40 for women, on a pension pot of £50,000.

Given the overall trend for falling annuity rates in conventional and enhanced annuity rates, MGM Advantage says that greater consideration should be given to alternative retirement income solutions that can really make the most of people’s retirement savings.

The MGMAdvantage Flexible Income Annuity (“FIA”) can offer the potential for investment growth, an income that can provide a natural hedge against inflation and it also comes with a minimum income guarantee for peace of mind. Funds also have the opportunity to recover in within the annuity wrapper.

£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	£2,929.17	£3,560.93	21.57%	£3,158.80	£10,739.92
Women	£2,771.46	£3,357.43	21.14%	£2,929.85	£11,719.40

£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	£3,237.56	£2,711.26	19.41%	£2,631.50	£8,947.10
Women	£3,038.56	£2,500.30	21.53%	£2,691.30	£10,765.20

£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	£3,943.47	£3,035.54	29.91%	£4,539.65	£15,434.81
Women	£3,644.64	£2,923.68	24.66%	£3,604.80	£14,419.20

 

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.

2. Graph is based on analysis of data from Investment Life and Pensions Moneyfacts by MGM Advantage since December 2009. RPI indexation is used for inflation.

For further information

MGM Advantage, Head of Media Relations

Paul Keeble                             07833 085387 paul.keeble@mgmadvantage.com

 

Citigate Dewe Rogerson

Jamie Brownlee                      020 7282 2858

Charlotte Pascal                     020 7282 1021