PensionsJun 30 2016

L&G’s lifetime mortgage sales overtake annuities

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L&G’s lifetime mortgage sales overtake annuities

Legal & General has announced £4bn of retirement new business sales in the first half of 2016, as lifetime mortgages sales overtake annuity sales.

Legal & General Group stated its retirement division had experienced strong new business sales in the first half of 2016, with minimal disruption caused by uncertainties over the outcome of the European Union Referendum.

New bulk annuity transactions totalling roughly £250m were executed in June.

Following the £2.9bn Aegon back-book transaction in May, this brings bulk annuity business executed in the first half of 2016 to £3.6bn, £1bn ahead of the full year bulk annuity sales figure of £2.4bn for 2015.

In the first half of 2016, lifetime mortgage sales exceeded £200m meaning these too have surpassed the full year comparator for 2015, as well as being greater than the firm’s individual annuity sales in the first half of 2016.

In total, sales of £4bn have been achieved in the period across bulk annuities, individual annuities and lifetime mortgages.

Kerrigan Procter, managing director of Legal & General retirement, said political and market uncertainty around the EU Referendum did not get in the way of business, as companies or individuals will always need to manage their employees’ or own retirement.

“Bulk annuity transactions continue to be an important way for Legal & General to deploy capital to help our UK clients, and use the premiums to invest in real assets such as UK infrastructure and direct lending.”

Bernie Hickman, chief executive of Legal & General Home Finance, said the firm has seen rapid growth, and within a year of entering the lifetime mortgage market, now provide more lifetime mortgages to our customers than individual annuities.

“Individual annuities still have their place, but customers want more choice in how they fund their retirement, with accessing housing wealth being an attractive option for asset rich, income poor retirees.”

Danny Cox, chartered financial planner at Hargreaves Lansdown said: “Brexit dominates the headlines, but L&G says the referendum did not get in the way of business, with minimal disruption to sales.

“The pattern of sales is changing though, with investors and pension providers reacting to both the rock-bottom level of interest and annuity rates and the new choices available under pensions freedom.

“The fall in annuity rates is leading to more and more asset-rich but income-poor retirees looking to access their housing equity to fund their retirement. For Legal & General, that’s showing up in booming lifetime mortgage sales, which overtook individual annuity sales for the first time in the first half of the year.

He added the growth in lifetime mortgages will only accelerate, as more baby boomers find that they are facing an ongoing squeeze from low savings rates and fewer able to rely on defined benefit pensions.

Yesterday (29 June) Legal & General cut annuity rates by an average of just under 2 per cent.

ruth.gillbe@ft.com