Portfolio Header1

Repositioning the business

Retirement Advantage

Following the major legislative changes in the annuity market, we repositioned the business, launching new products to address the changed demand and developing a new platform to originate equity release product.

Description

Retirement Advantage (previously "MGM Advantage") is a specialist in the UK retirement income market. Its market-leading products include guaranteed annuities (“GA”) and The Retirement Account (“TRA”).

A GA product offers a guaranteed, fixed annual income to retirees, and is aimed at people who want security from their retirement income. A better income can be paid compared to traditional annuities as the product takes into account life expectancy, as a result of medical diagnoses or lifestyle factors.

TRA was developed in response to legislative changes and enables retirees to blend certainty and flexibility through the use of guaranteed annuities and income drawdown in one tax-efficient product wrapper.

Transaction

Prior to acquiring Retirement Advantage in November 2013, we had been focusing on the retirement income industry investment theme for several years, believing that the combination of demographic and regulatory changes were underpinning sustained growth in this sector.
 
Our conviction for Retirement Advantage in particular derived from a number of key attractions, including: a bespoke and undersupplied sector of the UK annuities market which was, at the time of purchase, forecast to grow strongly for at least the following five years; the opportunity to significantly improve both the operations and asset management performance of the business; and, significant downside protection from buying a back book of annuities.

What we did

Shortly after acquiring Retirement Advantage, the UK government announced major changes to tax rules in respect of retirement income that affect the UK annuities market, including Retirement Advantage.
 
Reacting to this announcement, we worked with management to fundamentally reposition the business of Retirement Advantage, through the development of an equity release mortgage origination business providing equity release not only to Retirement Advantage but also to third parties, thus bringing earnings to the group without the need for capital backing. In addition, we oversaw new product development for the retirement income market, as well as enhancements to existing products and a substantial reduction in the company’s cost base in order to align the business with the new market environment.

How we exited

In January 2018 we sold Retirement Advantage to The Canada Life Group (UK).

Further information

Date of investment: November 2013
Deal type: Private sale
Exit date: January 2018
Exit route: Strategic buyer
Status: Realised

For further information, email:  retirementadvantage@tdrcapital.com
Visit the company’s website at:  retirementadvantage.com