Speaking last week at the all-party parliamentary group on insurance and financial services, the director of life insurance at the Bank of England warned that insurers face an “increasingly competitive landscape”, which is likely to put pressure on margins and profitability.
He said: “It is likely that annuity sales will be permanently and significantly reduced, as many customers choose either to take their money or move into alternative drawdown products.
“Significant potential issues include increased competition for the reduced pool of annuities, for drawdown business and in other business segments to compensate for the decline in annuity business and the impact of these on margins and profits.”
In the aftermath of the Budget, experts warned that annuity sales could drop 50 to 90 per cent as a result of more flexible rules allowing pensioners to access their savings in a lump sum.
Mr Bulley added that, long term, the decline in annuity sales could be around 75 per cent.
David Smith, wealth management director at London-based Bestinvest, said: “Most large insurance firms will be okay, as they have other strings to their bows and large operations in other parts of the market. Specialist annuity providers have a problem, however, as there are one or two that are solely reliant on the annuity market.”
