Providers post Q3 slump in individual annuity sales

A slump in annuity sales and the implementation of auto-enrolment are continuing to affect the pensions industry, a series of corporate results statements from various companies has revealed.

Speaking about Prudential’s interim management statement for the third quarter of 2014, group chief executive Tidjane Thiam said a 47 per cent reduction in sales of individual annuities reflected the “slowdown in the market following the UK Budget announcement”.

But he said Prudential had enjoyed strong sales of onshore and offshore bonds, individual pensions and income drawdown, which collectively increased by 37 per cent.

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Speaking about the Budget he added: “The changes have also opened up opportunities for us to meet customer needs for alternative retirement solutions, including income drawdown.”

In a results announcement for the third quarter, Aegon UK noted that during the period it had added 97 new schemes through auto-enrolment, while self-invested personal pension business was picking up for other companies, such as the James Hay Partnership.

According to its parent company, the IFG group, James Hay Partnership had recorded 2,050 new Sipps to April 2014, up from 1,743 for the previous year.

This came as the Association of British Insurers released figures including those from former ABI member Legal & General and Old Mutual which showed annuities sales were continuing to fall as drawdown sales reached their highest level.

Rob Yuille, ABI policy adviser, said: “Pension flexibility continues to affect customer behaviour in the retirement market, and it is clear that there are many people waiting to make a decision about what to do with their pension.”

Andrew Tully, pensions technical director for MGM Advantage, said: “Despite there being a clear demand for flexibility, at MGM we are still seeing a clear demand for annuities, with good sales across Q2 and Q3.

“When customers describe what they want from a retirement income product – security and guarantees – they are describing an annuity type product.”

Company results have revealed other industry shifts.

Announcing results for the six months ended 30 September 2014, Walker Crips chairman David Gelber said discretionary and advisory assets under management had reached £1.33bn, up from £1.15bn at the end of the same period a year before.

Time periodNumber of annuities soldNumber of new drawdown contracts
Q3 201440,08512,212
Q2 201446,3689,498
Q3 201390,4145,480
Q2 201389,8965,476

Source: Association of British Insurers

Adviser view

Nicholas Pratt, one of the directors of South Yorkshire-based The Pension Planner, said annuity sales had fallen off a cliff. “We are expecting a tsunami of enquiries about the pension changes in the first quarter leading up to April,” he said.


slowdown in sales of individual annuities reported by Prudential since the March Budget