Annuity Choices

casey_junior

What's your thoughts on MGM Flexible Income Annuities? How have they performed in the past, are customers happy with them?

casey_junior

I'll try again. I've been emailed a number of quotations for my maturing policy by my IFA. All but one are straightforward annuities, the other being a flexible income annuity from MGM. The quotes are all much of a muchness, but on reading the mgm pdf there are things like MIGs and starting income which would need £numbers on them before I could consider this. I'm talking to the IFA tomorrow and would like to be forearmed. Any thoughts?

CannySaver_2

Hi there

I'll give you a few thoughts:

1. The MGM product is investment linked i.e. the income you get is dependent upon the performance of the funds you are invested in

2. If you want a guaranteed income then only a conventional annuity or fixed term annuity will work for you. If you are prepared to take on some investment risk then you could consider an investment linked annuity

3. I looked at the MGM product but wasn't keen on it as I felt the fund choice was too restrictive, from memory there were less than 10 funds available. I preferred Income Drawdown, which offered seemingly more flexible benefits on death

4. I'd ask why MGM is the only investment linked annuity he has sent you, there are of course others available in both the unit linked and with profit form

5. I'd ask why investment linked annuity and not income drawdown. The former offers minimum income guarantees of course but to give these the provider needs to restrict fund choice

6. I'd also check the remuneration the IFA is taking (assuming he or she is being paid for by commission and not a fee) is the same for all products to eliminate the possibility of bias

7. As a more general point I would do some of your own annuity research using a pension annuity calculator such as the one given in the link, if you use a convetional annuity make sure you use the open market option (it sounds like you are doing), check there are no guaranteed annuity rates and check that you don't qualify for an enhanced annuity

I think that just about covers it.

The Canny Saver

jamesd

The biggest issue right now is whether it's better to use income drawdown for a while, until the temporary effects of fiscal easing and the safe haven status of the UK has reduced.

An investment-linked annuity may offer some way to handle that but I'm generally inclined to think that you're probably going to pay more thanit's worth for anything it delivers to you, compared to spending some money to buy a term annuity and leaving the rest invested paying an income.