STANDARD Life posted strong net inflows for the first nine months of 2014, but gave warning yesterday that the outlook was muddied by British pension rule changes and market uncertainty.
Quarterly sales of UK annuities plunged two-thirds year-on-year, it said, with sales so far this year down 55 per cent.
The Edinburgh-based life assurer cited the change in the last Budget making it no longer obligatory for those reaching retirement age to buy an annuity to provide an income in their old age.
There was also a further change this month making it easier for the over-55s to withdraw money early from their pension schemes.
In its interim management statement, the group said: “The outlook for annuities remains uncertain with a significant reduction in demand and a step-down in the profitability of our spread/risk business expected in the future.”
Paul Matthews, chief executive of Standard Life’s core UK business, said on a tele-conference yesterday a 50-60 per cent drop in annuities was expected but that the full impact would remain unclear until all the changes came into force next year.
Since the annuity change ushered in by Chancellor George Osborne, many life assurance companies have instead focused on the sale of other products, such as drawdown schemes that let holders take money out of their pensions.
“We do not know how many are going to go into (pension) drawdown,” Matthews said. Some critics have warned pensioners might draw down annuity money and spend it profligately on the likes of holidays and cars instead.
The insurer also said investment markets were unsettled and might hobble the pace of asset and revenue growth in the near-term.
Keith Skeoch, head of Standard Life Investments, the fund management arm, said: “I think equities look reasonably valued and they may edge up before the end of the year. However, we need to see evidence of growth outside the UK and US and cash sitting on balance sheets being put to use.
“We’re quite a way from getting visibility on those issues, though.”
Shares in the company dipped 1.2p to close at 384.1p.
Standard Life’s net inflows were £4.3 billion in the nine months to September, it said in its statement, with assets under management from continuing operations rising to £290bn from £237.6bn a year ago.
That rise was also helped by the £390m acquisition of Ignis Asset Management from Phoenix in March. It was also helped by the 290,000 new customers automatically enrolled on to its pension products.
Eamonn Flanagan, insurance analyst at Shore Capital, said Standard’s statement was cautiously upbeat, reiterating his “hold” recommendation on the stock. Gordon Aitken of RBC Capital said he expected Standard to be less hurt by falling sales of individual and bulk annuities than rivals such as Legal & General and Friends Life.
The Scots group expects to complete the sale of its Canadian business to Manulife for £2.2bn early in 2015, £1.75bn of which will be returned to shareholders.
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