21st March 2014
The UK’s insurers were walloped this week following the Budget announcement that sounded the end of enforced annuity purchases for retirees, writes Philip Scott.
On the back of the knock, London’s blue-chips stumbled with the FTSE 100 closing on Friday at 6,557.17, flat over the week and a mere 14.73 points up on the day.
After the Chancellor’s Budget speech on Wednesday during which he declared: “Let me be clear. No one will have to buy an annuity”, pension providers witnessed their shares tumble.
To date retirees have generally been required to buy an annuity with their pension pot. But in a move aimed at giving pensioners greater control over their life savings, the Government is now going to consult on how savers can draw their entire pension as a lump sum from April 2015.
In the biggest shake-up of the UK’s pensions industry in decades, Osborne said: “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.”
Worst hit was Resolution, off 14% over the week to close at 317.2p, while Legal & General lost 10% to 206p, Aviva, slipped 5% to 480.3p and Prudential fell 1% to 1,338p. However Standard Life finished 2% ahead at 366p after clawing back some ground.
Outside of the annuity firms, turf accountant William Hill was also hit by the Budget. Its shares dived by 10% over the week to 339.1p after the Government said it plans to introduce a new 25% rate of tax on betting machines, which would have reportedly slashed some £22m of the bookie’s profits last year.
The bearish attitude towards the UK’s supermarkets from last week continued throughout the past five trading sessions with Sainsbury down 1% at 309.5p while Tesco, which has signed a deal to enter India’s retail sector, fell 4% to 290.9p. Morrison, which sent a wobble through the market with its poor results last week bucked the trend and firmed 2% to 211.2p.
For their part, the miners endured a tumble over the week too, with Fresnillo down 4% at 885p and Randgold Resources 3% off at 4,831p.
Within the banking sector, HSBC moved 1% up to 605.7p, as did its Asian focused competitor Standard Chartered, closing at 1,200.5p while Barclays rose 2% over the week to finish at 235.9p. In contrast Lloyds shed 1% to close at 77.37p while troubled group Royal bank of Scotland was flat at 299.1p.
While Osborne’s plans for UK pensions hit the insurers, the news that he was increasing the annual Isa savings allowance from £11,520 to £15,000 was cheered by savers and investors alike.
The UK’s biggest fund-supermarket Hargreaves Lansdown, reaped the benefits of the higher threshold and is the week’s top riser on the leader-board after enjoying a 9% hike to 1,414p.
Also on the rise was Britain’s largest defence contractor, BAE Systems firming 6% to 411p while energy supplier SSE also jumped 6% to 1,510p. Arm Holdings and engineer Rolls Royce put on 5% apiece to close at 994.5p and 1,080p respectively.
Vodafone shares rose 2% to 227.2p, as brokers welcomed the news that it is to snap-up Spanish cable and telecoms group Ono in a £6bn deal.
The transaction will see the group expand its European footprint given that Ono has the largest next-generation network in Spain with 1.9m customers, across 13 of the country’s 17 regions.
Next week sees market updates and results arrive from among others plumbing giant Wolseley, Kingfisher and Icap.