Most annuities providers are sounding a note of defiance and have rejected suggestions they will be forced to revamp their retirement income propositions in the wake of the sweeping changes to the market in yesterday’s (19 March) Budget.
Resolution, owner of Friends Life, and LV admitted annuity sales were likely to fall as a result of the Budget announcement. Both agreed, though, with the consensus view of their peers that annuities would “continue to be an important product”.
Yesterday chancellor George Osborne rocked the annuities market to its foundation by stripping away all caps and limits on drawdown in the Budget.
Listed providers who saw £3.2bn wiped off their value in just one hour yesterday (19 March) failed to reveal plans to revamp their offerings in light of the shock Budget announcement.
A spokesman for Resolution said the chancellor’s proposals for greater choice in pensions will be far-reaching and the implications will take time to be fully understood.
He said: “There is a negative implication for new business flows in the individual annuity market, as some people utilise the increased flexibility provided by the chancellor’s proposals.
“However, we believe that annuities will continue to be an important product for those who value the guaranteed income throughout increasingly long retirement periods.”
John Perks, managing director of LV Retirement Solutions, argued annuities will continue to have a place within the new retirement income landscape but added other options “will now be given more consideration.”
He said LV was well placed with a wide range of ‘at retirement solutions’.
Mr Perks said: “With regard to people currently considering annuitisation, in light of the changes the chancellor has announced, we want to ensure that advisers and their clients have time to consider the retirement income options available and make the right decision.
“Therefore, for cases that we receive within the next fortnight and those already in the pipeline, we are extending our annuity quote guaranteed period for cases from 30 days to 45.
“For those customers who are within their 30 day cancellation period, and for new customers buying a product with us over the next month, we are extending their cancellation period to 60 days so that they also have time to reflect where necessary.”
Other annuity providers failed to mention a possible drop off in sales and insisted the product still had a future.
Rodney Cook, chief executive of Just Retirement, which saw it’s share price plummet by around a third yesterday, said annuitsation had not been mandatory for several years and yet advisers still supported the product.
He said: “For retirees that shop around annuities represent good value and a guaranteed income for life. That is why financial advisers have been recommending them over income drawdown. The Budget announcement doesn’t change that.”
A spokesman for Partnership, which lost more than half its value in the market sell-off, said despite the Budget axing the requirement to take an annuity, the product would “remain an important part of retirement planning”.