Annuity Firms Merger Means Less Competition

Annuity Firms Merger Means Less Competition.

Lower annuity rates caused by increased life expectancy, low interest rates and low gilt yields prompted the introduction of flexible pensions drawdown in April 2015.

Flexible pensions drawdown was introduced to give the consumer choice in retirement and as a result many pension companies that traditionally played in the annuity market saw new business falls of between 30-50%. This has clearly prompted a rethink for many annuity companies over the last 12 months.

Today, two leading annuity specialist firms: Partnership and Just Retirement announced that they will be merging. Many people may not have heard of either firms but within the finance industry both firms were considered leaders in the enhanced annuity market (the guaranteed annuity income market where people are given higher incomes due to ill-health or being smokers).

The new group will be known as JRP group and the merger is subject to the approval of shareholders.

Comment

This is a surprise move given that both Partnership and Just Retirement were the two major players in the enhanced annuity market and therefore direct competitors. Whilst we appreciate that any merger will pool their resources and experience as well as reducing labour costs, it will also reduce competition.

The annuity market is difficult at present and there is a need for both competition and innovation. Merging the two firms will no doubt give the new group combined mortality data which, we hope will enable them to develop and deliver a new breed of annuity.

In the short term though consumers now have an even smaller choice when searching for a low-risk annuity income in retirement.