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Friends Life reveals Q1 new business jump; warns of 70% post-Budget annuity sales hit

Friends Life has warned annuity sales could fall by up to 70 per cent following Chancellor George Osborne’s Budget pension reforms as the provider reported a surge in sales during the first quarter.

The insurer’s interim management statement, published this morning, reveals total year-on-year Q1 sales grew 42 per cent, from £142m in 2013 to £201m this year.

Corporate benefits sales were up 49 per cent, from £109m to £162m, while the UK division’s insurance business saw an 18 per cent jump in sales, from £33m to £39m.

Retirement income new business was unchanged at £15m but protection sales were up by a third, from £12m to £16m.

However, Friends Life says the Government’s decision to liberalise retirement rules from April next year will see annuity sales drop by between 50 per cent and 70 per cent.

This estimate excludes sales of policies with guaranteed annuity options, which are expected to fall by around 20 per cent.

The firm’s corporate benefits arm will also be affected by the imposition of a 0.75 per cent auto-enrolment charge cap in April 2015, although Friends Life expects this to be “significantly offset” by the forthcoming ban on commission in auto-enrolment schemes in April 2016.

Friends Life chief executive Andy Briggs says: “Our first quarter performance has been robust, driven by increased profitability and volumes in protection and corporate benefits – with net fund inflows into corporate benefits.

“The recent Budget announcement will give customers more flexibility around their retirement savings. Whilst some of these changes will have longer-term implications for our business and the industry as a whole, they will also create new opportunities.

“Neither the Budget nor the recent regulatory and market developments will impact on our short term ability to generate cash, but the Budget will impact on the delivery of our value of new business target this year.”

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