Perks: annuity market stabilising and could bounce back

Perks: annuity market stabilising and could bounce back

The annuity market is stabilising and could be about to recover, LV=’s managing director of retirement solutions has suggested.

John Perks said: “We have always said that as a market annuities would be down by up to 70 per cent, and the fact that we are focused on enhanced annuities has shielded us.

“The market has now stabilised and may see an upturn in the future.

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“We think fixed-term annuities will be used as the foundation block to build default solutions.”

Mr Perks also said the defined benefit to defined contributions transfer market had woken up, but LV= would measure by how much over the course of the year.

He added: “In the majority of cases it is right that DB transfers won’t be appropriate, but even with a minority that’s still a huge marketplace.

“I think we will start seeing people knowingly making value-destroying decisions because they need cash.”

Mr Perks was speaking after the mutual released its trading statement for the first quarter of 2015.

The figures showed that in the months before the pension reforms came into effect, LV=’s annuity business was worth only £70m – 39 per cent less than the same period in the previous year.

Its pension business as a whole was up 58 per cent to £185m while its overall life and heritage business was up by 19 per cent to £412m.

Adviser view

David Crozier, director of County Down-based Navigator Financial Planning, said: “I haven’t done many annuities in the last while but they are still on our radar.

“I don’t know if it is stabilising or not but annuities are still very much a part of what people are trying to achieve, and I don’t think it is dead.”