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Annuity sales collapse at Standard Life

Annuity sales at Standard Life have fallen by as much as two-thirds since Chancellor George Osborne unveiled changes to the pension rules in his Spring Budget.

Standard Life’s head of UK and European business Paul Matthews said the collapse in sales by between 50% and 60% had been expected and the company was in “wait and see” mode ahead of the new rules coming into effect in April.

Policyholders will be given greater freedom over their pension pots under the new arrangements which will end the requirement to buy an annuity.

“We are waiting to see how many [customers] will go into drawdown and now many will take cash,” said Matthews. Annuity sales are down 55% in the year so far and 67% in the last quarter.

However, annuity sales are a small proportion of its product portfolio and the company added 290,000 customers through auto enrolment in the year to date and has added more than 500,000 since auto enrolment began.

Speaking during the presentation of third quarter results from the company, Keith Skeoch, chief executive of Standard Life Investments said he expected equity markets to edge higher, but said volatility caused by a number of economic and geo-political factors made it difficult to predict where they will end the year.

“What we need to see is evidence of sustained growth from the UK and cash on company balance sheets put to to work,” he said.

On the integration of Ignis Asset Management he said the process would continue until the end of 2015 but he could not put a figure on the final impact on jobs.

The company reported that it now had £290 billion of assets under management, including £4.3 billion from Ignis. Third party inflow was strong with 67% coming from outside the UK. Total third party funds now stood at £158.9bn.

The sale of the Canadian business to Manulife is on course to complete early next year. Operating profits from the division will be lower, but the sale price is fixed and fully hedged at £2.2 bilion, allowing for £1.75 billion to be returned to shareholders.

Fee revenue across the group from continuing operations in the nine months to end of September were up 13% to £1,032m year to date including acquisitions.

New chief financial officer Luke Savage, speaking at his first results statement, declined to comment further on issues surrounding the Scottish referendum including the contingency plans the company made in the event of there being a Yes vote. He said the company would await publication of findings from the commission on new powers being led by Lord Smith of Kelvin.

He said that after the recent agreement with Industrial and Commercial Bank of China the company would be looking closely at its undervalued assets in India.

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