Annuity providers Just Retirement and Partnership have decided to merge to become JRP Group, according to a statement issued by the companies.
The £1.8bn merger is expected to result in Just Retirement shareholders owning approximately 60 per cent of the combined group while Partnership Assurance shareholders will claim the remaining 40 per cent.
The statement cited the 2014 Budget and the greater freedom for accessing pension savings as one of main the reasons for the merger These reforms had an immediate impact on the sales of individual annuities, which fell by 42 per cent from £11.9bn in 2013 to £6.9bn in 2014, according to data from the Association of British Insurers (ABI).
Advisers have said while this might make it easier to comply with regulation and compete with larger players in the annuity market, it is not good news for consumers or advisers. “Competition in the enhanced annuity market is already limited and this merger will further dent any competition,” Matthew Clark, a chartered financial planner at Seabrook Clark, said. “I am concerned that this lack of competition is against the consumer interest and may lead to a further decline in sales if rates worsen as a result.”
However, Stephen Lowe, group communications director for Just Retirement ,believes the merger will help in accelerating growth in this area. “The merger will deliver significant, financial and strategic benefit. By combining the businesses, there is more power to increase growth. It would enable us to accelerate product activity that we are both involved in independently at the moment,” he said.
He further added that both firms have been committed to the role of financial advice. “Under the new group we would continue to do so. Advice provides great solutions to many people across Britain so we see no reason for that to change at all,” said Mr Lowe
The deal is based on a Just Retirement share price of 199p and Partnership’s price of 166p and will see the new company look to raise close to £150m in fresh equity. This figure is expected to be used to support growth initiatives and product development.
“The new business plans to focus on the corporate market, which again may be to the detriment of individual clients. A smaller pool of annuitants will only lead to worse rates as the level of cross-subsidy between annuitants is reduced,” said Mr Clark.