(Update) Insurance company shares were hacked to bits today after chancellor George Osborne announced in his Budget that no one would have to buy an annuity anymore.
Partnership Assurance (PA.L) – a specialist annuities provider – saw its shares crash more than halve, losing 56% from 319p to 136p as investors saw the company's bread and butter vanishing into thin air.
Just Retirement (JRG.L), another pure play on the annuites business, also halved to 127p.
Insurance giant Legal & General (LGEN.L), which has several more strings to its bow than annuities, fell 6%.
Going into retirement has traditionally meant using your pension pot to buy an income with an annuity. But investors and industry experts said Osborne had killed the product in a Budget aimed at pleasing pensioners and savers.
By contrast, online stockbroker Hargreaves Lansdown (HRGV.L) spiked 14.5% from £13.02 to £15.04 after the chancellor unveiled plans to merge stocks and shares and cash ISAs into a 'super' ISA he dubbed 'New ISA' or NISA. It has a raised annual allowance of £15,000.
‘A quarter of annuity sales are under threat as a result of changes to single pot triviality rules,‘ said Adrian Walker, retirement planning manager at Skandia referring to the reform which will make it easier for people with small pension savings to encash all their money when they retire instead of buying a poor value annuity.
‘We will legislate to remove all remaining tax restrictions on how pensioners have access to their pension pots,’ said Osborne. ‘Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want.’
‘No caps. No drawdown limits. Let me be clear. No one will have to buy an annuity.’
‘This is a total game changer and will result in the almost immediate death of the annuity,’ said Stephen Ford, head of investment management at Brewin Dolphin.
FTSE, pound steady as investors await Fed and Budget (10:00)
Investors were content to tread water, skimming some small profits off FTSE 100 stocks and keeping the pound little moved ahead of the UK’s Budget and a monetary policy decision in the US.
Having managed small gains on Tuesday after Russian president Vladimir Putin said he didn't plan to seize any other regions of Ukraine after Crimea, Britain’s blue chip index dropped 0.2% to 6,589 on Wednesday morning, faring slightly worse than Europe’s STOXX 50 index, which was down 0.1%.
Of London shares making big moves, Ophir Energy (OPHR.L) plummeted 20% after announcing no luck from drilling operations from a well offshore Gabon.
Specialist annuity provider Partnership (PA.L) dropped 8% after missing City targets with a 24% pre-tax profits increase for 2013, despite a fall in new business premiums.
In the winners’ column Imagination Technologies (IMG.L) was up 7% after the chip designer told shareholders it had developed a new range of graphics processors.
Investors are looking ahead to the US Federal Reserve’s policy meeting starting today. In Janet Yellen’s first meeting as chair of the central bank she is expected to announce a further $10 billion cut to the scale of monthly asset purchases leaving them at $55 billion.
In the UK all eyes will be on chancellor George Osborne’s Budget, as well as the minutes from the Bank of England’s March monetary policy meeting and labour market figures.
The British pound was trading little moved at $1.6598 as traders kept their powder dry ahead of the day’s big schedule of announcements.