Financial News

  • 21 March 2014, 8:27

Pension Firms 'Lose Billions' After Speech

Britain's financial service providers have lost billions in value after the Chancellor delivered his Budget for 'savers and pensioners', Sky News has calculated.

By mid-afternoon an estimated 4.5bn had been wiped off the value of the top five UK pension companies listed on the blue chip FTSE 100 index.

The investor exodus occurred after George Osborne announced that defined contribution pension holders are to be offered free, impartial and face-to-face advice.

Mr Osborne added in his speech that pensioners must no longer buy annuities if they do not want to.

Annuities provide a fixed income but cannot be transferred between providers.

Legal & General saw 1.8bn wiped from its market value after shares were 14% down in mid-afternoon trades.

Resolution, which traded at almost 10% down for a while, then dipped to 15% down - equal to losing 800m.

Aviva lost an estimated 900m, Standard Life around 350m and Prudential saw 800m wiped due to negative trades.

Meanwhile, independent financial adviser Hargreaves Lansdown saw its share price up 7.5%.

The annuities market has come under scrutiny in recent month, amid calls for widespread reform.

Aviva's chief executive recently told Sky's Jeff Randall Live that the industry did need a shake-up.

The Chancellor also said remaining tax restrictions on pensioners accessing their funds would be removed.

He added that 20m would be spent within two years working with consumer groups and industry on the pension advice structure.

George Bull, senior tax partner at Baker Tilly, said: "For people with defined contribution pension plans, the Budget ushers in the biggest changes seen in the last 25 years.

"From 2015/16 pensioners are to be given greater control of their pension pots.

"Rather than being discouraged from withdrawing money early with a punitive tax charge of 55%, they will be encouraged to do so while paying their personal tax rate.

"'Trust the people' says the Chancellor, and it's clear he does as the increase in the tax yield from people taking their savings early is projected to be 3bn over the next four years."

Bookmakers William Hill and Ladbrokes were also bruised by the Budget, after Mr Osborne said fixed-odds betting terminal duty would rise to 25%.

The machines, many of which are located in high street betting shops, have spread rapidly in the last decade and have been a huge windfall for bookmakers.

Deloitte indirect tax partner Barney Horn said it would cost operators around 80m a year and added: "It will increase operating costs and could lead to further consolidation in the market.

"Online gambling operators are unlikely to be able to pass on the costs to consumers, but could be forced to cut back on marketing and player promotions."

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