The profitability of some of Britain’s biggest insurers was thrown into question yesterday following predictions of the end of the £12bn a year individual annuity market due to the government’s shocking pension announcements in the Budget, the Financial Times reports.
Analysts at RBC Capital Markets predicted this market would shrink 90 per cent following chancellor George Osborne’s announcement that “no one will have to buy an annuity”.
Barclays called it a “game changer” that had “the potential to lead to the demise of the UK individual annuity market”. It forecast that the value of new individual annuity business would shrink from £12bn a year to £4bn by 2015.
FTAdviser revealed yesterday (20 March) that shares in enhanced annuities specialist Partnership closed more that 50 per cent down following Mr Osborne’s announcement.
Other annuity providers also felt the bite of the chancellor’s Budget, as more than £3.2bn was wiped off annuity providers’ combined share capital in just one hour. When the markets closed, more than £4bn had been wiped off annuity providers’ total share capital.
Analysts cast particular doubt on the business model of enhanced annuity provider Partnership, whose profits are driven largely from new business and whose share price has now slumped 61 per cent since Budget day after closing yesterday 13 per cent down on 124 pence.
US hits Putin’s inner circle with blacklist
US president Barack Obama slapped sanctions on 20 individuals and a Russian bank linked to president Vladimir Putin’s closest associated, the Financial Times reports.
In a statement on the US Treasury, David Cohen, the under secretary for terrorism and financial intelligence, said: “With its currency near an all-time low, its stock market down twenty percent this year and a marked rise in interest rates, Russia has already started to bear the economic costs of its unlawful effort to undermine Ukraine’s security, stability, and sovereignty.”
The FT says the US response to Russia’s annexation of Crimea triggered an immediate change of ownership in Gunvor, the world’s fourth-largest oil trader.
Its co-founder Gennady Timchenko, who was included on the US blacklist, sold his 43 per cent stake to ensure its “continued and uninterrupted operations”, the company said.
Rating agency Standard & Poor’s recently revised its outlook for Russian debt to negative from stable, citing “rising geopolitical and economic risks”.
Mr Obama said the US was moving to “impose additional costs on Moscow” for its actions in Ukraine, according to the FT.
House prices on track to reach pre-crash levels
New figures from the Office of Budget Responsibility showing house price inflation is continuing to rise has intensified Liberal Democrat concerns over the impact of the Help to Buy scheme, according to the Guardian.
The increase is likely to peak in the third quarter of this year at an annual rate of 9.2 per cent, which is substantially higher than the OBR’s previous forecast figure is substantially higher than the OBR’s forecast from only four months ago.
The Guardian warns this means house prices are on course to reach pre-crash levels.
Business secretary Vince Cable has repeatedly questioned whether Help to Buy – which provides state support for people buying homes – is fuelling a property boom that could lead to an unsustainable recovery.
Weak stress tests for four major banks
According to the Financial Times, Federal Reserve stress tests found Bank of America, Morgan Stanley and Goldman Sachs would suffer huge losses in a financial crisis, “curbing their ability to return capital to shareholders”.
Of 30 banks tested, all the major US banks passed the tests, which modelled a hypothetical recession and market meltdown to gauge the resilience of the financial system. However, BofA, Morgan Stanley, JPMorgan and Goldman all came out with less than a 7 per cent capital ratio, “much weaker than anticipated”.
Public finances “on an uncertain footing”
The Institute for Fiscal Studies has warned that it is unclear how tax giveaways in the budget will be paid for as the chancellor’s reliance on a tax avoidance clampdown and making savings from public sector pensions left projections for the public finances “on an uncertain footing”, the Guardian reports.
IFS boss Paul Johnson said the possibility that savings will fail to materialise showed that the budget “might not be as neutral as it looked”.
Nearly 5m trapped in 40p tax band
According to the Institute for Fiscal Studies, nearly 5m people will be stuck in the 40p tax band by next year, following chancellor George Osborne’s failure to significantly increase the band rate in this year’s Budget.
The tax rate will kick in at an income of £42,285, following a rise that is less than inflation.
The Mail says those caught out will be £546 worse off next year, however the Treasury will rake in an extra £3.6bn.
