Budget 2014: Insurers’ shares tumble on Budget annuity announcement

The Chancellor’s announcement that from next year pension savers will no longer have to buy an annuity to take money out of their pensions has rocked the share price of the UK leading annuity providers.

Only an hour after George Osborne finished delivering his speech, specialist retirement income provider Just Retirement Group fell by 30 per cent. 

The biggest initial drop from the big traditional annuity providers is Legal and General, whose share price has fallen by 11 per cent. Standard Life’s share price had fallen by 3.7 per cent, Aviva’s share price had fallen by 7.4 per cent, and Prudential had fallen by 2.6 per cent. Shares in Friends Life parent Resultion Limited fell by 7.3 per cent.

The shares in Partnership Assurance had already fallen sharply at the beginning of the days trading and they continued to fall in the aftermath of the Budget, and were 27 per cent down on their opening price by 2:15pm.

Osborne announced that from April next year anyone who is aged 55 or over will be able to take their entire pension fund as cash – although only the first 25 per cent will be tax-free. The remaining 75 per cent of the fund would be taxed at the saver’s marginal rate.

Osborne said: “I am announcing today that we will legislate to remove all remaining tax restrictions on how pensioners have access to their pension pots.

“Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want.

“No caps. No drawdown limits. Let me be clear. No one will have to buy an annuity.”

In advance of next year’s changes, Osborne also announced an increase in the overall the trivial commutation limit from £18,000 to £30,000, to take affect later this month. Individual pension pots are currently limited to £2,000 for trivial commutation but this will be increased to £10,000.

Skandia retirement planning manager Adrian Walker says: “A quarter of annuity sales are under threat as a result of changes to single pot triviality rules. Today’s budget announcement confirmed that consumers with pension pots of up to £10,000 are able to access their savings without having to buy an annuity. Our analysis of ABI data suggests that around 25 per cent of annuity sales are currently for pension pots of less than £10,000.”