Aviva is set to launch a suite of alternative retirement income products in the “near future” as annuity sales tumble in the wake of the Budget, after its chief executive admitted the firm “sped up” product development in the wake of George Osborne’s bombshell announcement.
Responding to a question from FTAdviser on its post-Budget plans, Mark Wilson, group chief executive of Aviva, said the insurer had already made “a deliberate move” away from annuity business as margins “were not where they should be”.
Mr Wilson was speaking in the wake of Q1 results for the life and pensions giant, which revealed the value of new business in the UK fell 22 per cent in the first three months of the year to £89m on the back of a 43 per cent slump in individual annuities to around £40m. Annuity sales were down 21 per cent.
The fall echoed similar drops reported by rival life insurers in the past two weeks, with L&G revealing sales were down 40 per cent and Prudential citing a 35 per cent slide.
Just Retirement said that despite a first quarter rise it had seen sales plummet 50 per cent drop in the weeks since the Budget, while Partnership highlighted a similar trend in its interim results yesterday.
FTAdviser revealed in the wake of the Budget that most insurers, including Aviva, introduced temporary extensions to cooling off periods for existing annuity sales in the wake of the changes. Aviva also implemented a short-term suspension of new business in the immediate aftermath of the speech.
Mr Wilson said the company had decided to focus investment away from annuities and had already developed a suite of “competitive” retirement income product and had further new “outcome orientated” deals in the pipeline.
He said: “It would be fair to say some product [developments] have been sped up. We will launch them in the near future.
“We already had a suite of products but we have sped up some other things. Because we do not just rely on annuities we have a lot of resource that we can put to these things.
“One of the things we have said we will focus on is our investment proposition and our investment products. It is key to our group and key to our future. We have some excellent products that we have been using, for example some income drawdown products.”
Aviva’s results claimed the fall in annuity business in Q1 was offset in part by increases in protection and equity release, though the firm declined to give a breakdown on sales by product area.
It said it also expected an “increased focus on mid-size bulk purchase annuity transactions” to further mitigate the impact of the proposals.
This echoes other providers including L&G, Prudential and Partnership, which have all announced they will be targeting new bulk annuity business to make up for lost individual annuities sales.
