Two of the City’s retirement companies have warned George Osborne’s decision to stop forcing people to buy annuities with pension savings will have "material effect" on sales growth.
Partnership Assurance — which also revealed it had handed its chief executive a 25% pay rise — and Just Retirement both admitted that sales would be hit, at least in the short term.
The two firms specialise in “non-traditional” annuities which can provide a better income for people like smokers or those with health conditions, although they have other businesses as well.
In a trading update, Just Retirement warned that the Chancellor’s unexpected move in last month’s Budget — which prompted shares across the industry to dive — was “having a material effect” on annuity volumes, and admitted that its forecast of 7% sales growth was now “no longer appropriate”.
Partnership Assurance told a similar story in a surprise letter from chairman Chris Gibson-Smith published alongside its annual report. He said: “Over the short term, until the implications of the proposed changes are fully understood, it is likely that we will see a reduction in the sales of our individual retirement annuities.”
Partnership is keeping its dividend policy “under review” until the impact of the changes becomes clear. However both companies said the changes could ultimately prove beneficial, particularly if people are encouraged to shop around more.
The pay hike for Partnership boss Steve Groves means his basic salary soared to £625,000 from £500,000. His bonus was held at £750,000 but he also had options over shares worth £1.25 million set aside.
Just Retirement separately said it had made a final salary scheme “pension de-risking” deal worth £36 million to the company.