Annuity rule change claims first victim

29 April 2014

The Budget that brought so much positive change for savers and retirees has claimed its first corporate victim.

Retirement specialist MGM Advantage is to make 80 redundancies across its annuity business. While some will be achieved voluntarily and through normal staff turnover, the rest will be compulsory.

The company said it is "repositioning the business" and will introduce "a radical new proposition for the retirement income market that will be available early next year once the new regulations are in place".

In his March Budget, Chancellor George Osborne made a series of surprise announcements including the government's decision to do away with compulsory annuities for those with a money purchase (defined contribution) pension from next April.

Under MGM's new plans, customers will have more choice about what to do with their pension pots and will be able to consider a combination of annuities, income drawdown and possibly things such as equity release.

Yet that transformation has clearly not been without serious damage to the company's prospective revenue - a recent Moneywise poll of over 1,300 people indicated that just 7% of people will still buy an annuity once the new rules kick in next year.

Chris Evans, chief executive of MGM Advantage, said: "It is clear that the changes proposed in the recent Budget create many challenges for the industry. We have a great track record of responding to change, and it has become second nature to us over the last few years to adapt to opportunities that arise."

He added: "Our customers will continue to receive support through this transformation of the at-retirement market."

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