MetLife calls for innovation in annuity market
by Gill Montia
Story link: MetLife calls for innovation in annuity market
Persistently high inflation has cut the spending power of pensioners’ fixed incomes by 16% over five years, new research from MetLife claims.
According to the life and pensions provider, a 60-year-old taking a £6,180 annual income from a £100,000 fund today will see the real value cut to just £5,215.98 within five years, if inflation averages 3.45%.
The firm also points out that annual inflation at 3.45% would mean prices rising by 133% over 25 years, with the result that a pensioner would need a nominal income of £14,399 in 2036 to have the same spending power of £6,180 today.
With rising longevity an increasingly important part of the retirement income equation, MetLife is highlighting the needs for innovation in retirement products, for example, in the area of fixed-term annuities.
These allow clients to transfer to another retirement product during their selected term, should they become ill and qualify for enhanced terms on a lifetime annuity, or if the dependant attached to the plan should die.
MetLife’s managing director, Dominic Grinstead, comments: “The new retirement reality means planning for up to 25 years in retirement and even moderate inflation is a major risk to anyone on a fixed income.”
He adds: “Pensioners literally have to live with the decisions they make on retirement income so providers need to focus on innovation and offer more flexible solutions which enable people to maintain control over their retirement.”