Partnership has revealed the hit from the Budget as interim results show it wrote £200m of of individual annuities in the first quarter of 2014 compared to £357m in Q1 2013, as it warned sales since the Budget remained at approximately 50 per cent of the level seen in the month prior.
In its interim management statement for period from 1 January 2014 to 13 May 2014, including sales for the three months ended 31 March 2014, Partnership said the Budget has caused “significant disruption” within its core market.
However, of the cases in the pipeline at the time of the Budget, “after further discussion with their adviser”, over 70 per cent of individuals have so far decided to continue with their annuity purchase from Partnership.
The firm was one of many life insurers to extend its cooling off period following the Budget announcement to allow consumers to cancel a product they had signed up to prior to the changes.
Despite this seeming endorsement of the product from some, average daily individual annuity quote levels, which Partnership says is the most relevant indicator of potential future sales, in the eight weeks since the Budget remained at approximately 50 per cent of the level seen in the month prior to the Budget.
Partnership said it has taken “immediate action to manage its cost base in the short term”, including freezing recruitment, removing contractors where possible and requiring CFO approval for all capital spend.
It said it is focused on new product development and innovation in light of the increased flexibility afforded by the Budget announcement, citing its recently launched ‘enhanced choice annuity’.
It added there is “no indication” that care annuities and protection sales have been impacted by the Budget and stood at £20m and £1m respectively in the first quarter of this year.
Steve Groves, chief executive, said: ““Since the Budget, we have seen quote volumes at approximately 50 per cent of the pre-Budget level, indicating that annuities continue to represent an attractive retirement income option for many customers.
“Partnership’s commitment to doing the best for its customers and meeting their retirement income needs has not altered, nor has our customers’ need to manage their retirement assets through a highly uncertain future lifetime. The Budget has provided us with more flexibility to innovate, whilst continuing to give our customers the financial security they desire in their retirement.
“It is still early days in the post-Budget world, but I am encouraged by the recognition by customers and advisers that the guaranteed income for life provided by our annuities, which typically pay an annuity rate of 6-7 per cent, continues to be attractive.”