Shares in enhanced annuities specialist Partnership closed more that 50 per cent down after chancellor George Osborne’s shock announcement that will make drawdown a more compelling alternative to buying an annuity.
Shares in the firm opened at 319p, with a total share capital of £1.28bn. However, by close the price in Partnership shares had plunged to 143p, representing a share capital of only £572m.
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.
• Just Retirement share capital fell £529m to £771m at close, just over half of its £1.3bn at yesterday’s opening;
• Legal and General lost £1.1bn, closing at £12.5bn;
• Prudential lost £700m, closing at £34.3bn;
• Aviva lost £550m, closing at £14.45bn;
• Standard Life lost £260m, closing at £8.42bn; and
• Resolution, owner of Friends Life, lost £230m, closing at £4.75bn.
Partnership declined to comment, but a source close to the situation said: “Clearly analysts are trying to make sense of the news released in the Budget, and what it means for continued appetite in annuities in particular.”
In a general response to the sweeping reforms, a spokesman for Partnership said despite the Budget axing the requirement to take an annuity, the product would “remain an important part of retirement planning”.
The provider’s spokesman pointed out customers choose the product “because they value the security provided by annuities in the face of uncertain investment returns and future life expectancies” - and pointed to the value and income boost offered by enhanced annuities.
He added: “Partnership will work constructively with the government during the consultation process. We believe that these proposals do not affect our range of defined benefit, care annuity and protection products.”
Among the changes to the way people fund their retirement, the government will
• cut the income requirement for flexible drawdown from £20,000 to £12,000;
• raise the capped drawdown limit from 120 per cent to 150 per cent;
• increase the size of a lump-sum small pot to £10,000; and
• increase the overall size of pension savings that can be taken as a lump sum, from £18,000 to £30,000.
The chancellor said: “Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want.
“No caps. No drawdown limits. Let me be clear: no one will have to buy an annuity.”