Buy-in prices 'fall 3%' after budget
Buy-in prices have fallen by up to 3% as a result of changes announced in last month's Budget, one consultant says.
The lifting of restrictions on how defined contribution (DC) savers can take their pot on retirement is expected to shrink the individual annuity market and increase competition for bulk annuity deals.
It is anticipated this will lead providers who also write individual annuities to commit more capital to bulk annuities and convince several new entrants to join the market.
Hymans Robertson head of risk transfer solutions James Mullins (pictured) said the schemes he was working with had seen a "dramatic positive movement" in prices over the last month.
He said: "If we strip out the impact of market movements, we have seen pricing fall by around 3% between quotations at the start of March and, post-Budget, quotations at the start of April."
LCP partner Emma Watkins said pricing had been competitive before the Budget, but that the announcement was likely to increase capacity.
But she said: "Any price savings we are seeing coming through, beyond market movements, we believe are coming through as a result of a competitive process rather than directly related to the budget."
Legal & General (L&G) head of bulk purchase annuities Tom Ground said he hadn't seen any immediate changes in pricing, but that competition was increasing at the smaller end of the market.
He said: "It has led to more interest from the enhanced bulk annuity providers, who look like they are increasingly willing to do deals without the ‘enhanced' part."
But Costas Yiasoumi, director of defined benefit solutions at Partnership - a medically underwritten annuity specialist that said it might have to change its business model after the budget - said its approach to bulk annuities hadn't changed.
He said: "Partnership's approach is to apply individual underwriting expertise to offer competitive bulk annuity pricing year in year out. The budget doesn't change that."
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