Listed enhanced annuities specialist Just Retirement has announced it will be cutting £14m in costs ahead of a likely plunge in annuity sales following the Budget in March, which it said has already reduced sales volumes for individual annuities by around half.
In interim results published this morning (12 May) covering the three months to the end of March, the group reports a strong rise in individual annuity sales of 34 per cent to £288m and a substantial total new business increase of 66 per cent from £300.4m to £497.3m.
However, chief executive Rodney Cook states that the final two weeks of the quarter following the Budget, at which George Osborne proclaimed new rules to end any effective compulsion to annuitise, saw annuity sales volumes drop by around half.
The results state many advisers are still recommending enhanced annuities for clients and that it “remains to be seen if... post-Budget trading will be representative of the remainder of the year”, but it that the company would still be undertaking a “group reorganisation to produce annual cost savings of £14m in the next financial year”.
Just Retirement adds that the restructure will add £5m in costs in the current financial year, potentially signalling redundancies. It also says it will be “investing” a further £5m in the coming financial year.
The restructure is likely to focus around bulk annuities, sales of which rose from zero to £37m over the three months, and equity release, sales of which surged 128 per cent to £159m.
Fixed-term annuity sales of £50.2m were down 13 per cent on the preceding quarter, though the firm suggests its recent launch of a one-year annuity in the wake of the Budget and ahead of the implementation of the new rules next April could boost sales in the months ahead.
This is despite stinging criticism of the products from the likes of Ros Altmann, who on Friday called for them to be banned amid claims of high commissions on non-advised sales and poor returns for consumers of just 0.5 per cent on what is essentially a short-term drawdown contract.
Steve Lowe, director at enhanced annuity provider Just Retirement, disputed the claims and said his firm only sells the product through advisers and does not pay commission.
He added that the product gives a valuable option to some savers, particularly those “who choose to take their tax-free cash from their existing provider, who then do not have any option but to move their funds into another pension contract”.
Just Retirement’s share price was up around 4 per cent in morning trading at the time of writing to 163.8 pence. This remains close to 40 per cent lower than its price of 268.85 pence prior to the Budget announcement in March.
The company is now valued at £787.8m, around 30 per cent lower than the £1.13bn market capitalisation when it listed in November.
