Just Retirement has revealed it cut 90 roles and has scrapped the planned salary review for all employees set to take place in July 2014, as part of its £14m cost reduction plan that was announced in the wake of the Budget.
According to its financial accounts, sent to shareholders this week, the moves are largely due to lost annuity business as a result of the chancellor’s radical pension changes in this year’s Budget, which will give pensioners full access to savings and opened up options for ‘at-retirement’ income.
The report revealed that total quarterly annuity sales in the UK had fallen to £1.8bn by Q2 2014, according to the Association of British Insurers, having peaked at £3.9bn during Q4 2012.
It added that total UK annuity sales contracted by 28 per cent alone during Q2 2014 from £2.5bn, “primarily as a result of pension reforms announced in the Budget”, and by 42 per cent for the 12 months ending June 2014.
Just Retirement is one a of several annuity providers to cut roles since the Budget.
In April, MGM Advantage announced it will be making 80 redundancies and will be launching a “radical new proposition” after admitting it “would be madness” to ignore the radical pension changes announced in the Budget.
In June, Partnership announced the loss of approximately 100 roles across its London and Redhill offices as part of cost savings further to those outlined earlier this year.
Just Retirement’s annual report said: “The group’s cost reduction plans for expenses in the year 2014/15 meant that over 90 roles were lost and the planned salary review for all employees, including executive directors, did not take place from July 2014.
“Those employees remaining whose company pension contributions were 10 per cent (approximately 75 per cent of the workforce) saw a one-year 5 per cent reduction in August 2014.
“Executive directors’ and senior management’s benefit allowances were also temporarily reduced by 10 per cent of base salary and the non-executive directors’ fees were reduced by 10 per cent, both with effect from 1 July 2014.”
Last month, the chancellor dropped another pension bombshell by stating that pension funds will no longer be subject to the 55 per cent tax charge when transferred as a lump sum within a pension, regardless of the age of the policyholder.
As a consequence, specialist annuity providers Just Retirement and Partnership, who are listed on the London Stock Exchange, saw their shares drop by 7 per cent and 5 per cent respectively. Both set a new year low during the session.
However, a Deutsche Bank equity research note on Just Retirement dismissed the claims, stating that the market has “completely misunderstood the latest tax changes”, citing in particular the fact that value protected annuities have been included in the new ‘death tax’ rules.
