MGM Advantage announced today that it will be making 80 redundancies and will be launching a “radical new proposition” after admitting it “would be madness” to ignore the radical pension changes announced in the Budget.
The firm said the 80 roles are aligned to the annuity business and the redundancies will be managed where possible through “natural turnover and voluntary redundancy”. It added, however, that the changes would involve compulsory redundancies.
The company said it is developing and launching a “radical new proposition” for the retirement income market that will be available early next year once the new regulations are in place.
The proposition would include a raft of new product developments and enhancements to existing products, such as developing blended retirement solutions, revising the investment proposition, and making product changes to the investment-linked flexible income annuity.
A spokesperson for MGM told FTAdviser that the group does not believe the annuity market will pick up again to pre-Budget levels following the chancellor’s now infamous statement that ‘no one will have to buy an annuity’.
He said “we can’t ignore the fact” that market has changed, adding “it would be madness if we did”.
Since the Budget, there has been speculation as to how much the annuity market will shrink, with RBC Capital Markets predicting the annuity market this market would shrink 90 per cent.
Barclays called it a “game changer” that had “the potential to lead to the demise of the UK individual annuity market”. It forecast that the value of new individual annuity business would shrink from £12bn a year to £4bn by 2015.
Chris Evans, MGM chief executive, said: “In the need to respond quickly and effectively, we will focus on what we do best, developing innovative retirement income solutions. Advisers and our customers will continue to receive support through this transformation of the at-retirement market.
“In the interim, we need to align our cost base to our new business plan for the year. Although I am personally deeply saddened by any redundancy, I have a responsibility to lead the business into the best possible shape, ready for the opportunities created by the current market turmoil.”
LV= announced in its results published this week that it also expects to see “lower levels of annuity sales over the coming months” and that margins will be negatively impacted on the range of retirement solutions products in the future.
A spokesperson for LV= said: “LV= is a top five provider for income drawdown, enhanced annuities and equity release and our retirement solutions business is positively positioned to take advantage of the changes in the market following the chancellor’s announcement on 19 March which gave retirees more choice as to how they take an income from their pension fund.”
A spokesperson for enhanced annuity provider Partnership told FTAdviser that it’s “far too early to predict how the market will respond in terms of consumer and adviser behaviour”.
He said: “Clearly this is something we are keeping a close eye on. Enhanced annuities are a key area of retirement planning and we hope it will be moving forward.
“Potentially it may lead to the company reviewing its strategy and business model but at this stage, it is not possible to say with any certainty what the medium and long-term impact will be.”
