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.”