Figures from the Association of British Insurers show the slump comes after the Government changed the capital gains tax regime last month. The ABI lobbied strongly against the changes which put investment bonds and mutual funds on an uneven playing field as the latter is now subject to a 18 per cent flat rate while bonds are still on a 40 per cent tax rate.
Total single-premium accumulation and protection business was £16.09bn, down by 15.5 per cent from £19.04bn in the first quarter last year.
Individual pension sales fell from £5.34bn to £4.67bn but occupational pension sales rose from £2.28bn to £2.83bn. Individual protection business fell by 17 per cent to £297m from £357m in Q1 last year.
Regular-premium accumulation and protection business dropped by 2.1 per cent to £1.35bn from £1.38bn in Q1 2007. Individual protection sales fell from from £259m to £216m while group protection sales dropped from £86m to £73m. Occupational pensions fell slightly from £207m to £203m but individual pensions bucked the trend, rising by 4.4 per cent to £838m.
Decumulation business saw a 3 per cent drop to £3.351bn from £3.453bn in Q1 last year.
ABI spokesman Jon French says: “I would think the fall in bond sales reflects the aftermath of the capital gains tax changes and the Chancellor’s decision not to adjust the tax treatment of bonds to bring them into line with other savings vehicles. The decrease in some pension figures is disappointing. This is likely to be because the A-Day effect has now worn off.”
The ABI has changed the way it reports new business data and has dropped the annual premium equivalent measure and now reports results under three separate categories – accumulation and protection products, split into single-premium and regular premium, and single-premium decumulation products. Accumulation and protection include pensions, investments and life policies and decumulation includes annuities and income drawdown.