Enhanced annuity sales plummet 29% in Q1

Compared to Q4 2015, when annuity sales totalled £357.4 million, quarterly premiums fell by 29% to £254.2 million, "signalling a sector still in flux".

Conversely, the performance of unit-linked guarantees fell in the third and fourth quarters of 2015, but increased in Q1 2016. Overall, the total value of premiums sold increased by 17% in the first three months of 2016 compared to the previous quarter, although the average premium per policy actually decreased by 2% to £97,240 during the same period.

Jeremy Nurse, Director at Willis Towers Watson, commented: “This latest drop wipes out modest gains realised in 2015, with sales now only marginally higher than the eight-year low of £241.5m recorded in the second quarter of 2015.

“However, in contrast to the steep declines recorded in 2014, which directly followed George Osborne’s March 2014 Budget announcement on new pension freedoms, the last three sets of quarterly results provide a broader picture that suggests the rate of decline may now be slowing and some stability returning to the annuities market.

“The new pension flexibilities introduced in April 2015 had a major impact on the market for enhanced annuities, but these pension freedoms are now settling in and working as intended. This is a credit to the providers who have had to work hard to get ready for the new conditions and provide appropriate retirement solutions for customers in the future.”