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Standard Life reveals 50% post-Budget annuity sales slump

Standard Life has seen a 50 per cent drop in annuity sales since the Budget but insists the reforms will have a “relatively small” negative impact on the business.

The insurer’s Q1 interim management statement, published this morning, reveals total UK assets under administration rose marginally in the first three months of 2014, from £124.7bn at the start of the year to £125.8bn on 31 March.

However, Standard Life says annuity sales have halved since Chancellor George Osborne announced radical changes to the way pension income is taxed from age 55. The reforms will come into force from April next year.

In the interim, the Government has significantly increased the overall trivial commutation limit from £18,000 to £30,000.

In addition, the triviality limit on personal pension pots has risen from £2,000 to £10,000, with individuals allowed to take up to three separate pots as cash.

“Changes to annuity regulations in the UK resulted in a reduction in our UK annuity sales of around 50 per cent following the Budget announcement,” the provider says.

“While it will be some time before long-term trends become clear, the negative profit impact of the changes will reflect the relatively small size of our annuity business.”

Standard Life says annuities accounted for just 6 per cent of group operating profit, or £45m, during 2013.

Speaking to Money Marketing, Standard Life UK chief executive Paul Matthews admits annuity sales are likely to remain low for the rest of the year.

He says: “Virtually all of the customers with small pots below £10,000 have chosen to take their pots as cash since the Budget.

“People with large amounts are tending to defer until next year and as a result our annuity business is down about 50 per cent. We expect that to stay the same for the rest of the year.

“Over the longer term we expect the majority of people with larger pots will use an income drawdown product rather than buying an annuity.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I think we all agree the lifetime annuity is a product which has become poor value and totally inflexible, therefore, some sort of sensible thinking was needed, moving forward. The government should have insisted, along with the FCA, that the ‘at retirement’ industry look at ways to introduce new products which would suit the customer, providers and the regulator. The government have been lazy in the way they have handled this and have taken an easy and vote winning option. I can only see this causing ‘tears’.

  2. No doubt that’s why Mr Matthews wants Standard to give clients the advice on vesting.

    Quoting figures can be a bit meaningless unless we know how much the make outside the UK as a percentage of the total. I’ll guess it is significant and growing.

    The Pru and L&G are already doing significant business outside the UK. Legislation, Regulation and innovation have decimated the life office proposition. So they are searching pastures new, where regulation is less intrusive, markets less mature and the consumer more gullible. In other words they are still in the mindset of the 1970’s.

    What’s the betting that they are flogging endowments in Africa and the Far East?

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