High Court blocks Prudential annuity sale

PRUDENTIAL’S £12bn annuity sale to Rothesay Life has been blocked at the 11th hour by the High Court in a ruling that could have significant implications for the pensions industry.

Judges ruled that Prudential policyholders had not opted to have their insurance policies run by Rothesay Life.

The portfolio transfer was first announced by Prudential in March 2018 as part of plans to demerge its UK & Europe business. The agreement was made in two parts: first the transfer of assets and liabilities to Rothesay Life, and then the transfer of legal ownership of the pension policies.

The High Court blocked the second part of the transaction because policyholders “strenuously opposed” the deal on the grounds that they had selected Prudential as their provider based upon “its long history as a leading UK insurance company”. Policyholders said Prudential’s assurance business had committed to make payments to them for the remainder of their lives, and that they trusted them “to honour that commitment”.

Both Prudential and Rothesay Life can appeal against the judgment.

Charlie Finch, a partner at pensions consultancy LCP, said: “This is very unusual. [Transfer deals like these] normally do go through. It has interesting implications for the industry.

“It will make insurers pause for thought on annuity transfers. This demonstrates the high level of protection [the High Court] does provide. It’s not just a rubber-stamping process.” Mr Finch noted that Rothesay Life would still be financially responsible for the policies without owning them.

“This raises questions about how certain companies can be about these kinds of transactions,” he added.

Prudential said that while it was “disappointed” by the judgment, it would not affect plans for the demerger of M&G Prudential, which is expected to be completed this year.

The current benefits and service for policyholders covered by the proposed transfer are unaffected.

One City analyst familiar with Prudential said this would be “more of a setback for companies whose business model revolves around the consolidation of [annuity] back books”.

Prudential shares closed down 1pc in London at £14.15.