First-half sales up 54% as higher interest rates boost annuity offering.
Pension provider Just Group saw its best six months for annuity sales since the introduction of pension freedoms on the back of rising rates.
Half-year results published this morning showed that in the first half of 2023, Just’s guaranteed income for life sales grew by 54% from £305m last year to £470m this year.
Annuities are usually backed by portfolios of government bonds. Recent rises in interest rates have increased yields on bonds, in turn pushing up rates providers can offer.
Just Group CEO David Richardson said the latest figures marked the best retail period for the company since the 2015 overhaul of the pension system.
‘I am delighted the guaranteed income for life market has returned to strong growth and has had its busiest six-month period since pensions freedoms were announced in 2014,’ he said.
Former chancellor George Osborne famously announced the pension freedoms in his 2014 Budget speech with a promise that ‘no one will have to buy an annuity’. That speech led to a major drop in annuity sales, hitting specialist providers hard. Just Retirement, as it was then known, eventually merged with rival Partnership in response to the new rules.
But over the past 12 months, providers have noted an upsurge in annuity sales as interest rate rises have pushed annuity rates up. This morning, Legal & General also reported an increase in retail annuity sales from £453m in the first half of 2022 to £575m this year.
Just Group said it saw more opportunities to grow annuity sales from advisers on the back of the FCA’s work on retirement income and consumer duty rules coming into force.
‘We estimate that since 2014, more than £130bn of cumulative retirement savings have moved to drawdown on platforms, often without a decumulation strategy. Due to the higher customer rates now on offer, we expect advisers and customers will re-examine the role of guaranteed income in retirement,’ it said.
‘The introduction of the FCA’s consumer duty in July and the findings later this year from the thematic review into retirement income advice are also likely to increase the importance of considering guaranteed solutions to help customers achieve their objectives.’
Charles Walmsley (Citywire New Model Adviser)