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Pensions group 'well placed' for changes

Reforms see individual annuity sales fall 58% at Just Retirement

One of Britain’s top sellers of annuities has seen a fall in income following the Chancellor’s pensions reforms which will no longer require retirees to buy one.

Just Retirement, which has been identified as one of the likely big victims of the changes, said sales of annuities fell 4% in the first half, offset by sales of bulk final salary schemes.

Just RetirementChief executive Rodney Cook said the company was “well placed” to meet the challenges when the pensions market is reformed in April and retirees are given more choice over their pension pots.

Mr Cook said: “As expected, we have seen a marked decline in individually underwritten annuity [IUA] sales – although not to the extent that some commentators had initially predicted.

“We are well placed to take on the challenges that will emerge post-April when the second wave of Budget reforms take effect.”

In the six months to end December income from individual annuities fell 58% from £645.8m in 2013  to £271.2m.

However, the firm completed 17 defined benefit schemes, one worth £76m, the other £75m, enabling total annuity sales in the second quarter to rise by 39%.

Total annuity sales were down 4% on the corresponding period by 4% to just over £661m.

Individual annuity volumes rose 5% in Q2 compared to Q1, although the company admitted there may be further volatility as new products are launched in April.

Underlying operating profit fell 10% to £42.6m against $47.3m last time.

Mr Cook added: “This is our first set of results in the post-Budget environment, so I am delighted to be able to point to resilient profits, early signs of a return to growth in sales, and record embedded value.

“Around half of our underlying operating profit came from new business in H1 14/15, while the significant value of our back book supported total earnings. Net inflows after annuity payments and expenses are strongly positive, which underpins the growth in our back book.

“We strongly welcome the Financial Conduct Authority’s proposed reforms announced in December. Further encouragement for all retirees to shop around will give us access to a larger customer base and means that a fully brokered, medically underwritten individual annuity market could finally be achievable.

“The FCA has also confirmed that for retirees with modest pension pots, the right annuity purchased on the open market offers good value for money relative to alternative drawdown strategies. Moreover, at Just Retirement we have no legacy issues relating to past sales of annuities or pre-2000 pension products.

“We have had a very good first half and whilst it remains to be seen what the second half will bring, we face the future with confidence that demand for our new products, underpinned by our medical underwriting skills, will be strong.”

The company declared an interim dividend on 1.1p.

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