As a result of rising inflation, the average retired household - where the main occupant is aged 65-74 years - needs to find an extra £774.70 a year to maintain the standard of living they enjoyed just 12 months ago, according to MGM Advantage, the retirement income specialist.
The corresponding figure for a home where the main occupant is aged 75 years and over is £383.91 and the average for all households is £1,222.66.
MGM Advantage says the growing cost of living in retirement means that the traditional conventional, fixed level annuity will become less appealing.
Research by MGM Advantage has shown that a growing number of people are willing to accept an element of investment risk - providing there is an appropriate level of tailored protection - in order to give their retirement income the potential for growth to combat inflation.
One option is an asset-backed annuity, which gives customers the potential to receive more income than through a conventional annuity. MGM Advantage believes its Flexible Income Annuity provides 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 says the flexibility of the product - and the fact the minimum investment is £10,000 - means it is suitable for the majority of UK consumers who are willing to accept an element of investment risk on some of their pension savings, providing they have a minimum income guarantee to rely on.
Low annual management charges and a simple range of investment funds to choose from will make the product attractive to a previously poorly served group of retirees, says MGM Advantage.
Part of Marine and General Mutual Life Assurance Society which was established in 1852to fill the poorly-met insurance needs of seafarers and traders, MGM Advantage’s 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 independent financial advisers (IFAs) across the UK.
"January saw the biggest year on year Consumer Price Index (‘CPI') increase since records began which is having a dramatic impact on the income available to those in retirement,” said Aston Goodey, Sales and Marketing Director, MGM Advantage.
“Until recently, conventional fixed level annuities have been popular as the ‘safe’ option at retirement because they offer a guaranteed fixed income for life. However, the risk of not inflation-proofing their income is making more people explore alternative solutions.
"More needs to be done across the industry to improve the choice for people at retirement, and we believe investment-linked annuities have an important role to play.
“Our new Flexible Income Annuity provides the opportunity for growth and protection against inflation, along with a minimum income guarantee that provides the level of security that people want when they're planning their income for the rest of their lives."
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