Just Group boosted by rate hikes as pension income sales more than double to nearly £2bn
- Just experienced strong growth in the personal annuity and corporate pension market
- Demand for individual annuities has increased due to interest rate increases
- The company completed its largest-ever corporate pension deal during the period
Just Group has confirmed its annual financial targets after pension revenue sales rose by £1bn to £1.9bn in the first half of FY 2023.
The Surrey-based insurance and pensions specialist attributed the Bank of England rate hikes to strong new business growth in both the private annuity market and the defined benefit de-risking market.
For the first, the FTSE 250 company posted a 54 percent increase in revenue as financial advisors and clients took advantage of rising rates to boost guaranteed annuity returns.
Outcome: Retirement specialist Just Group attributed rate hikes to strong new customer growth in both the retail annuity market and the defined benefit de-risking market
I just mentioned that the six-month period was the busiest for the individual annuity market since reforms announced in 2014 gave Britons more flexibility in accessing their defined contribution pensions.
Demand for these products has historically been relatively weak, but has recently improved significantly as government bond yields have soared.
At the same time, the value of defined benefit transactions, where companies cancel all or part of their pension obligations, rose 149 per cent to £1.4 billion.
The company completed its largest-ever corporate pension deal during the period: a full £513m buy-in to the GKN Group Pension Scheme.
Other completed sales included an estimated £190m buy-in from the Trustees of the Ibstock Pension Scheme, which Just said was “enabled” by the rise in government bond yields in the second half of 2022.
In total, the company completed 35 defined benefit plans for the first six months of 2023, compared to just 14 in the same period last year.
Following the impressive result, Just said he is “very confident in achieving our financial ambitions for the full year,” as well as medium-term underlying operating profit growth of an average of 15 percent per annum.
David Richardson, CEO of the company, said: “We are exceptionally well positioned to continue to benefit from the unstoppable trends and positive developments in both of our markets.”
He added that Just’s defined benefit business had “a record pipeline of new business opportunities” for the rest of the year.
According to actuarial consultancy LCP, about 1,000 occupational pension plans have been funded enough to be transferred to an insurer.
Richardson also said the combination of rising interest rates and new rules from the Financial Conduct Authority would spur more annuity sales.
Under the FCA’s incoming Consumer Duty guidelines, insurers and other financial services companies face new requirements to ensure better outcomes for customers.
Just group shares were up 6 percent, or 4.6 pence, at 81.8 pence Tuesday morning and have grown about a fifth percent over the past 12 months.