UK second-hand annuity market would boost retail focused fund firms -Moody's

LONDON, March 20 (Reuters) - Asset managers with a strong retail focus and platforms that offer rival funds will be the big winners from British government plans to create a second-hand annuity market, Moody's Investors Service said.

Schroders (LSE: SDR.L - news) , Fidelity and BlackRock (NYSE: BLK - news) are all well placed to profit from the changes, announced by finance minister George Osborne in Wednesday's Budget, which build on plans to scrap an obligation to buy an annuity for new retirees.

While that change freed up the cash-piles of 320,000 savers a year, the second-hand annuity market could see up to 5 million people move retirement monies currently funding an annuity, or income for life, to investments in stock and other funds.

"Asset managers with open-architecture fund platforms that are dedicated to retail investors will benefit from the opening of the retirement saving market," said Moody's, referring to those platforms which offer funds run by rival firms.

"Given the size of the 'in retirement' market, even a modest shift by policyholders away from annuities into investment funds will lead to meaningful increased assets under management," it said in a report.

The degree of switching will depend on the shape of the market and the prices offered, Moody's said, and will be determined in part by who exactly is allowed to buy them.

"However, given the recently low annuity rates, driven by low interest rates, alternative investments may present a more attractive yield, albeit with no lifetime guarantee and more asset risk." (Reporting by Simon Jessop; Editing by Elaine Hardcastle)