Quotes for individual annuities fell below 50% of levels seen in last year’s comparable period, the Partnership Assurance Group said, demonstrating the “significant disruption” it has seen within its core market as a result of the proposed pension changes announced in the budget.
According to Partnership CEO, Steve Groves, despite the disruptions and uncertainty created by the budget, the group continues to focus on its long term strategy.
Writing in the commentary to the group’s half yearly report, Groves said: “This includes extending our defined benefit de-risking proposition, developing new products to meet the expected ongoing customer need for longevity insurance and progressing opportunities to leverage our unique dataset internationally,” he said.
As part of this, the group announced it has signed an investment management agreement with Rothschild to invest £150m in commercial mortgages.
This it said, further diversifies the investment portfolio. “Partnership will benefit from Rothschild's extensive experience of managing this asset class and Rothschild will co-invest alongside Partnership.
For the first six months of the year, Partnership reported new business premiums of £409m, compared to £631m for the first half of 2013. Of this number, £334m came from individual annuities, compared to £590m for the first half of last year, “with sales of £135 million in Q2 reflecting the impact of the Budget,” it said.
Total operating profit in the half year to 30 June 2014 was £33.4m, a decrease of 44%, the group said.
“There remains significant uncertainty over the near-term level of annuity sales as research indicates that people are currently deferring their retirement or their at-retirement decumulation decisions. This level of deferral may increase as we approach April 2015 and the changes to the Pensions Tax rules are implemented,” the group says.
But it adds, while in the longer term this increased flexibility will lead to fewer people buying an annuity, “consumer research indicates that a guaranteed income for life continues to be an attractive retirement option. It is also clear that longevity risk cannot be managed on an individual basis.”
It adds: “Post April 2015, we see the potential for our addressable share of the market increasing as more retirees are encouraged to shop-around through the impartial guidance process. We are pleased to note that the guidance process will be impartial and we will continue to work with government, regulatory and industry stakeholders as the new regime is developed.”
