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Bulk deals boost L&G as individual annuity sales fall 40%

Legal & General saw a 40 per cent fall in individual annuity sales in the first three months of the year, including a £15m hit as customers cancelled their annuity purchase in the wake of the Budget.

L&G’s interim management statement, published today, shows individual annuity sales fell from £406m in Q1 last year to £244m this year. The insurer says around £15m in losses relates to cancellations during the extended cooling off period following the new pension freedoms announced in the Budget.

The insurer was boosted by the £3bn bulk annuity deal it agreed with the ICI Pension Fund in March, said to be the largest ever bulk annuity purchase arrangement by a pension scheme in the UK.

Retirement new business premiums went from £800m to £3.3bn following the contract with ICI.

L&G says it expects to write growing volumes of bulk purchase annuity deals, which it believes will “more than offset individual annuity reductions”.

The provider adds it is developing low cost income drawdown products to give customers the option of how much risk they want to take and how much they want to be guaranteed.

L&G Investment Management saw inflows fall 19 per cent from £4.7bn to £3.8bn, driven by lower international sales.

The Cofunds platform, which L&G acquired in May last year, saw net inflows of £1.5bn, giving total assets under administration of £65.6bn.

Retail protection posted record sales in Q1, up 56 per cent from £27m to £42m. UK group protection sales remained flat at £20m.

L&G group chief executive Nigel Wilson says: “We already benefit from favourable demographic trends; we have economically and socially useful products for customers; and with our LGIM economists forecasting 3 per cent plus economic growth in the UK and US, we are excited about the prospects for our business.

“There is strong demand for our pension de-risking and protection products in both markets – the £1.8trn of UK defined benefit liabilities will provide substantial future business. We believe the UK defined contribution market will grow from around £250bn today to £3trn by 2030.”


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There is one comment at the moment, we would love to hear your opinion too.

  1. Julian Stevens 7th May 2014 at 9:06 am

    Will L&G develop an Assured Income DrawDown product, designed to utilise fully over the remaining (underwritten) lifetime of the retiree their entire fund, with an insurance element against premature fund burn-out? This, as I see it, has to be the way forward to deliver higher rates of income than an annuity (unless gilt yields climb much higher) without compromising security.

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