High Court Blocks £12bn Prudential-Rothesay Annuities Transfer

Finch also said Friday’s ruling should give pension scheme trustees comfort that effective protections were in place in the event a provider sought to transfer annuities to another insurer. 

The High Court judge blocked the Prudential-Rothesay transfer on the grounds that Rothesay did not have the characteristics that policyholders were drawn to in selecting Prudential as their annuity provider.

The judge said Rothesay was a “relatively new entrant without an established reputation in the business” and although it had solvency ratios at least equal to Prudential’s, “it does not have the same capital management policies or the backing of a large group with the resources and a reputational imperative to support a company that carries its business name if the need were to arise over the lifetime of the annuity policies”.

One of the main developments in UK pensions in the past year or so has been buoyant activity in the market for de-risking via insurers. The market hit a record £17.6bn in the first half of the year, and consultants have predicted more than £40bn of deals for the full calendar year. 

M&G demerger unaffected

The transfer of Prudential’s £12bn annuity back book was announced in March last year in connection with Prudential’s plans to spin off its UK and European investment business. It had already reinsured the annuity book with Rothesay.

Prudential said it was “disappointed” by the High Court’s decision, but it had no impact on the schedule for completing the demerger of M&G Prudential – expected in the fourth quarter of this year.

It also said the judgement had no affect on the benefits and service for the policyholders covered by the proposed transfer.

Prudential and Rothesay have a right to appeal.