• Text size      
  • Send this article to a friend
  • Print this article

Annuity processing halted after shock Budget move

Pensions companies are suspending the processing of annuity applications in case customers want to change their minds following the Budget.

The industry has seen billions written off market values following the Chancellor's shock move to allow personal pension pots to be taken as cash, bypassing annuities.

Now retirees who have already accepted an annuity quote will be given an extra few weeks to take new advice and decide whether they want to go ahead, or cancel.

Scottish Widows said all applications made after February 18, which would normally have a 30-day cooling-off period, would instead have a 60-day period to confirm the transaction. Any new annuity quotations issued would also be valid for 60 days. "For all applications already in our pipeline or received since the Budget announcement, we are proactively contacting customers (or their IFA) to make them aware of the new rules and check that they still wish to proceed," Widows said.

Richard Jones, annuities director, added: "Annuities will remain a part of the retirement market and still be an appropriate choice for many. We will also be looking at new solutions, covering annuities, income drawdown and other options that can help customers manage for life in retirement."

Standard Life, which yesterday indicated there would be no change to its normal procedures, is now allowing anyone who bought an annuity after February 12 to cancel, and extending the right to cancel until April 18. "This means that for some people, their cancellation period will more than double," a spokesman said. He added: "We are communicating with those who have already settled and are within their cancellation period, to let them know about the changes and new options, asking them if they wish to change their mind."

Standard Life shares, however, bucked the trend by closing at 366p, just above their pre-Budget level, while Prudential shares have since Tuesday dropped from 1369p to 1338p, Aviva from 516p to 480p, and Legal and General from 230p to 206p.

A spokesman for Edinburgh-based Aegon UK said: "We're currently assessing the best outcomes for our customers and will communicate within days. One of the options we're looking at is extending the 'cooling off' period for annuities. But if the tax-free cash sum has already been paid we would need to get HMRC agreement to reinstate it to the member's policy."

Mutual insurer Royal London, owner of Scottish Life, said: "With regard to current applications we are holding off from processing them whilst we look at how best to communicate the changes to customers and amend all the necessary paperwork to allow customers to make an informed choice."

Aviva and Prudential both said they were contacting advisers and customers to discuss whether applications should go ahead.

At annuity specialist Partnership, the cooling-off period has been extended to April 11 for all annuities sold after March 3. The firm has seen its share price crash from 319p on Tuesday to 121p last night, slashing its market value from £1.27bn to £484m.

NFU Mutual has introduced by far the longest retrospective right to a change of mind, allowing cancellations of any annuities agreed after January 19.

However Nick Flynn, director at specialist advisers LEBC, said: "Out of dozens and dozens, only two have asked us to stop the purchase."

Contextual targeting label: 
Finance

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

221215