Press Release

60 per cent of adults CONCERNED AT IMPACT OF INFLATION ON RETIREMENT INCOME

- 14.5 million people expect income needs to increase through retirement
- Quarter of non-retired adults have not started to plan their retirement income
- But one in five (6.4 million) non-retired adults will not seek professional advice on their retirement needs

19 July 2010 – New research(1) reveals that 60 per cent of non-retired adults, equivalent to 21 million people, are concerned about the effect that inflation will have on their future income in retirement, but over six million will not seek professional advice. The survey from retirement specialist MGM Advantage shows that concerns over the impact of inflation rises to 70 per cent of non-retired adults aged 45 to 54 and to 78 per cent for those aged 55 to 64 years.

Despite acknowledging the erosive effect inflation could have on their retirement income, a quarter (27%) of non retired adults have not yet started thinking about how to get the best possible income from their pension savings.

MGM Advantage believes that if more people sought financial advice at this crucial stage of their lives, they’d have a better understanding of the products that could protect them from inflation and meet their changing retirement income needs.

The latest Inflation Report from the Bank of England states that economic conditions remain uncertain while in January there was the biggest year on year increase in the Consumer Price Index (‘CPI’) since records began.

The company warns that this is already having a dramatic impact on the income available to those in retirement and that the situation could get worse unless those nearing retirement take steps to protect their income from the negative effects of inflation.

Ways that people are planning to get the highest retirement income from their pension savings…	Proportion of non-retired UK adults
Haven’t started to think about it	27%
Will talk to a financial adviser	22%
Don’t intend to talk to anyone	18%
Will use online comparison websites to compare products available	18%
Talk to friends and family	14%
Talk to existing pension provider	11%
Take the retirement income offered by current pension provider	10%
Speak to the bank	10%
Speak to employer	7%
Have no idea how to access help to get the best retirement income	6%

Source: MGM Advantage, March 2010

According to MGM Advantage, 40 per cent of non-retired adults believe that the amount of income they will require as they progress through retirement will increase. This rises to nearly half (49%) of non retired adults aged 55 to 64 years. Just over one in five (22%) expects their retirement income requirements to remain the same, while 23 per cent expect them to decrease throughout retirement. Finding suitably flexible products that can meet these changing needs becomes even more important.

Aston Goodey, Sales and Marketing Director, MGM Advantage comments, “While it is encouraging that more people are aware of the impact that inflation will have on their retirement income, it is a particular concern that so many have no intention of seeking professional advice on how best to address this. Many people still have unrealistic expectations of the retirement lifestyle they will be able to afford. The reality could be very different, particularly if people take the income offered by their existing pension provider rather than shopping around for the best deal using the open market option.

“Another way that people can enhance the level of income they receive in retirement is to select a retirement income product that maintains exposure to the stock markets. While it does involve some risk, it also has a better chance of generating upside returns, negating the impact of inflation and maintaining a comfortable lifestyle.”

MGM Advantage 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 - and that this will fuel strong growth for the asset backed annuity market.

Earlier this year MGM Advantage launched a Flexible Income Annuity which gives 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.

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