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Pru annuity sales slump cushioned by bond surge

Prudential is the latest insurer to report plummeting annuity sales in the wake of the Budget as consumers look to alternatives ahead of April next year.

The Pru’s interim management statement, published this morning, reveals UK individual annuity sales for the first nine months of 2014 measured on a PVNBP basis fell 47 per cent year-on-year, from £1.61bn to £861m.

Intermediated annuity sales were down a massive 70 per cent, from £406m to £123m, while the value of annuities sold direct or through partnership agreements dropped 39 per cent, from £223m to £135m.

Internal vesting annuity new business was also down 39 per cent, from £981m to £603m.

The impact of the Budget overhaul was cushioned, however, by a 28 per cent surge in onshore bond sales, from £1.26bn to £1.62bn. Sales of “other products”, which includes offshore bonds, income drawdown and individual pensions, surged by 51 per cent, from £825m to £1.41bn.

The Pru has also secured six bulk annuity deals worth a total of £1.41bn this year. In the first three quarters of 2013 the provider completed one deal worth £146m.

Corporate pension sales, meanwhile, were down 18 per cent, from £553m to £455m.

Overall, total sales across the UK & Europe division rose 27 per cent during the first nine months of 2014, from £4.4bn to £5.6bn.

The Pru says: “The significant reforms of the pensions industry announced by the UK Government…have resulted in an increasing proportion of customers deferring the decision to convert their pension savings into retirement income.

“The more recent announcement on changes to tax treatment of pensions after death is consistent with these wider pension reforms and is welcomed.

“The increased flexibility afforded by these reforms should ultimately help create an environment where more people are encouraged to save. The changes have also opened up opportunities for us to meet customer needs for alternative retirement solutions, including income drawdown.”

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