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Just Retirement issues annuity sales warning following Budget pensions bombshell

Just Retirement has warned shareholders it is unlikely to meet the 7 per cent growth in annuity sales flagged in its interim management statement following radical reforms announced during the Budget.

The pension liberalisations, which come into effect from April next year, will allow anyone aged 55 or over to take 100 per cent of their pension pot as cash.

Just Retirement, which relies heavily on individually underwritten annuity sales, saw its share price plummet over 40 per cent on the day of the Budget as investors predicted huge falls in annuity business.

Announcing the completion of a £36.5m bulk annuity deal today, Just Retirement chief executive Rodney Cook warns investors the 7 per cent growth in year-on-year individual annuity sales outlined in the firm’s interim results is now “inappropriate”.

He says: “Although it is very early days, our current trading suggests that the Budget has had a material effect on individually underwritten annuity volumes.

“As financial advisers and customers come to terms with the new environment we are optimistic that large numbers of them will continue to secure a guaranteed lifetime income in retirement, particularly if the new guidance concept is effectively implemented.

“However, given the high degree of uncertainty in the near term outlook, the 7 per cent growth in full year sales that we flagged at interims is no longer appropriate.”

The provider will issue a further market update on 12 May when it releases its Q3 interim management statement.


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. In my opinion, much of the negativity about annuities is driven by the perception of compulsion, rather than outright rejection of the product. Once that compulsion is removed, I suspect retirees will come to realise that the right annuity has its place, and the impact on annuity sales will not be as significant as first anticipated. Aside, I also expect that once retirees attracted to new flexibility start to take into account the income tax implications, taking pots as cash at the earliest possible opportunity will not be the answer for many of them.

  2. goodness gracious 9th April 2014 at 2:01 pm

    I agree the 7% year on year increase will not happen since the budget and Mr Cook has to flag this up for the market.
    Interestingly I have been dealing with a client who is coming up to 65 and has a small pot, but larger than the 30k limit for lump sum payment. Having discussed the new options available since the announcement, even delaying income payment until 2015, my client still decided to go for an annuity. As a smoker and with some minor health issues, Just Retirement came up with the best rate and I have recommended them.
    Heavily underwritten annuities still have their place.

  3. I agree with the above comments. Annuities, especially impaired health, will still have a place to provide a minimum income guarantee during retirement. We will see a drop from 75% of the funds value being used to purchase an annuity but annuities will still be sold.

    The best thing the budget did was highlight to more people that they do NOT have to buy an annuity and other options are available. More options means a harder decision and the increased chance of employing the services of an adviser.

  4. Like Nick I agree with the sentiment of the above posts – I also echo the point made by Mark that any objections seemed to have stemmed from the fact annuities were ‘forced’ on many.

    An annuity will continue to offer a secure method of genearting income in retirement and many people place great importance on that peace of mind.

    I suspect those who sound the ‘death knell’ of annuities may well be those trying to sell (rather than advise) alternatives and will focus on all the perceived negatives of an annuity without stating the main benefit – secured income (typically) for life.

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