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

April 2010 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.

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.