MGM Advantage says annuity age limit debate clouds real issues

MGM Advantage, the retirement income specialist, has responded to recent calls for a temporary suspension of the age limit for annuities.

Craig Fazzini-Jones, Director and Head of MGM Advantage Designs for Retirement said: "People are understandably concerned that pension funds have lost value recently, resulting in reduced income for those about to retire. Clearly no one wants to lock in losses if they retire this year. But a debate over temporarily abolishing the age 75 rule clouds the real issues affecting UK pensioners.

"In our view, a blanket rule change is not helpful. Firstly, the average pensioner isn't in a position to wait until age 75 to start receiving an annuity. A great many people need their retirement income at an earlier age for all sorts of reasons, including poor health. Secondly, for those people turning 75 who might prefer to wait, there are implications for delaying. Policymakers could do a great deal to help by empowering pensioners who aren't aware of their options.

"While your pension pot could increase when market conditions improve, the loss in income in the meantime could be significant. So for many pensioners, annuities are the right option in falling markets because they offer a guaranteed income for the rest of your life. It would be difficult for a pensioner to match that guarantee by investing in markets unless they are prepared to take considerably higher risks.

"Added to this, annuity rates are the highest they've been for many years. And you benefit even more if you shop around, because the difference between the best and worst rate can be as much as 12 per cent. For someone with severely impaired health the difference can be as much as 40 per cent. Although pension funds have lost value, in certain conditions, pensioners could regain that income by shopping around for the right annuity. For example, some people might opt to buy an asset-backed annuity, which would allow their investments time to recover when markets rise."

Mr Fazzini-Jones continued: "For all these reasons we must encourage people to shop around for their retirement income. We also believe it would be prudent for policymakers to educate pensioners about the open market, because two-thirds are still losing out by not shopping around for their annuity. Moreover, the majority of pensioners will be better off in retirement* if they seek financial advice, no matter how small their pension pot. In the current environment, independent advice will be even more important than ever before as people seek certainty, safety and security in retirement."