PensionsOct 16 2014

Partnership focuses on diversifying as annuity sales plummet

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

Partnership has seen its individual annuity sales plummet by more than a third in the third quarter of this year, as it admits a need to focus on diversifying the business model.

Its interim management statement, published today (16 October), revealed that individual retirement annuity sales fell to £69m in the third quarter, compared with £260m a year ago.

The statement for the three months to the end of September admitted “widespread disruption in our core individual annuity market as a result of the Budget”.

Total sales hit £89m for the quarter, compared with £300m for the same period a year ago.

As a consequence, Steve Groves, chief executive of Partnership, said its focus on “diversifying our business model and positioning it for the new retirement market is undiminished”.

He said: “As indicated at the time of the interim results, it was considered likely that a further slowdown in sales would take place as we got closer to the new regime being implemented in April 2015, principally as the cost of deferring a decision becomes less onerous for customers.

“In line with previous guidance and Q3 performance, quotes remain below 50 per cent of pre-Budget levels and conversion rates also remain below pre-Budget averages, reflecting the continuing disruption to advice across distribution networks and the deferral of decision making by customers.

Mr Groves explained that at this stage there is no obvious catalyst to change this behaviour prior to the new regulations being implemented and deferrals could increase further in the run up to next April.

He expects market disruption and uncertainty to prevail in the short term, “but I remain confident that by leveraging our core competences, we will achieve our long term goal of delivering a diversified, growth business over time.

“Our pipeline of defined benefit transactions continues to grow, but remains lumpy as Q3 has demonstrated, sales of care and protection products are unaffected, and, although the timing of any international expansion remains uncertain, our discussions with potential partners to deploy Partnership’s unique intellectual property in the US are progressing well.”

Mr Groves’ comments come after FTAdviser revealed that several life companies are said to be looking at launching so-called ‘third way’ unit-linked guarantee products in an attempt to stem losses from falling single annuity sales.

Unit-linked guarantees are products written under drawdown rules and positioned in the middle ground between conventional annuities and income drawdown, which offer some guarantee over income or capital values, while allowing a fund to remain invested.

emma.hughes@ft.com