Advisers have welcomed the merger between annuity specialists Partnership and Just Retirement, while cautioning that there is still a lot of work to be done in a challenging market.
This morning’s announcement detailed that they will be rebranded as the JRP Group, with Just Retirement shareholders owning approximately 60 per cent of the combined group and Partnership shareholders owning approximately 40 per cent.
Mel Kenny, Chartered financial planner at Radcliffe and Newlands, said that the news came as a shock, as the two firms were previously quite aggressive competitors in the space.
“But clearly white flags have finally gone up given the changes to the annuity landscape and a merging of resources is a sensible way forward.”
Graeme Mitchell, managing director at Lowland Financial, told FTAdviser that his initial thoughts are for the staff who are likely to be most directly impacted by the move – the Just Retirement board expects the merger to result in pre-tax cost savings of at least £40m per annum – although he added it will be good for the sustainability of both companies and those already with annuities being better protected with one bigger provider.
“However, in the recent past both companies have been directly competing with some of the best enhanced rates, so I wonder if they will be so keen to sharpen the pencil for clients buying an annuity in the future now there is less competition. I see a potential further fall in annuity rates with less competition in the enhanced market.
Alan Solomons, director of Alpha Investments and Financial Planning, commented that they probably make a very good fit and it is sensible of them to have acted so soon.
“It is the obvious way to adjust to the new world of annuities and pension freedom – costs have to be cut in line with falling revenues and this is a good way to do it.
“Whether this will make them a takeover target for another insurer wanting to strengthen this sector of their own business, time will tell,” he mused, adding that the deal may also make it more affordable to create innovative new products.
Colin Rodger, director at Alexander Sloan Financial Planning, suggested that in the new at-retirement landscape, flexibility is the key.
“Annuities are perceived as being less flexible, so I think within the rules of what actually constitutes an annuity, product development and innovation are going to be very important. Given the appeal of flexi-access drawdown they need to come up with something quick.
Carl Lamb, managing director at Almary Green, added: “They had no choice and I see a continued decline in this market.”
The merger follows plummeting individual annuity sales since last year’s Budget, with Just Retirement’s May results showing total annuity sales down 15 per cent to £874.6m, compared with the nine months ending 31 March 2014.
Partnership’s results, published today, also revealed a drop in underwritten annuities from £334m to £128m year-on-year for the six months to 30 June 2015.
peter.walker@ft.com
