Bank of England asks insurers how they will cope with pensions reform
14th July, 2014
Andrew Bulley, director of life insurance at the Bank of England, has asked all insurance companies how they plan to cope next year following George Osborne’s pension reforms. As of April 2015, it is projected that the annuities market will shrink by a massive 75 per cent as retirees are able to draw from their pension pots without the risk of a huge tax hit.
Shares in the UK's life insurers plummeted in March this year following the chancellor's momentous decision which effectively negates the need for more than 13 million pension contributors to invest in an annuity. Bulley recently told a meeting of Parliament’s All-Party Group on Insurance and Financial Services that sales are likely to significantly decrease on a permanent basis.
The Bank of England's supervisory arm, the Prudential Regulation Authority (PRA), is to hold talks with all insurers whose main focus is the annuity market to find out how they plan to stay afloat. The PRA will discuss many issues with the companies affected, including the very real risks to both their existing business models and long-standing policies which target those customers who have retired.
The Budget decision made waves at the beginning of the year but the aftershocks are likely to be felt by insurers and the annuities market for many years. Osborne's reform, however, is expected to have a positive impact for retirees and future pensioners, who will no longer be restricted by a financially detrimental policy after they have used market comparison websites to compare life insurance quotes online to find the best deal available.