Pensions boss in plea to minister
Britain needs to ‘swap debt habit for savings culture’
Mr Loney, whose company is one of Scotland’s biggest insurers, has backed his call with a five-point wish-list to new pensions minister Ros Altmann.
He wants affordable advice, improved education, a review of tax on savings, and more encouragement for the young to save. He also says new consumer protection is needed around annuities.
Mr Loney said: “We welcomed the liberalisation of the pension system from the outset, and George Osborne [the Chancellor] deserves credit for giving long term saving a real “shot in the arm” with this bold initiative.
“We now hope that the new Conservative government will focus on building a savings culture in the UK which replaces the debt culture of the last two decades, and helps all citizens to become more financially resilient and enjoy better living standards in later life.”
Royal London embraces the former Scottish Life, Scottish Provident and Bright Grey businesses, and Mr Loney’s comments coincide with strong first quarter figures showing new life and pensions business up 40% to £1.38 billion.
Group pension sales have continued to gain momentum with a 16% increase on 2014, which was a record year for Royal London sales of workplace pensions.
Sales of individual pensions have increased by 68%. Sales of Royal London’s integrated drawdown facility have increased by 67%.
The new pension freedoms are providing a strong stimulus to sales of Royal London’s individual pension and drawdown facility, it said.
The asset management business continues to perform well, with Royal London Asset Management (RLAM) achieving net new external business inflows of £111m (31 March 2014 £902m).
The consumer protection business has been growing significantly since it started selling insurance products direct to consumers last year. New business volumes for the intermediary protection business are up 32% on Q1 2014. The group will bring together Bright Grey and Scottish Provident as a single Royal London branded protection business by the end of this year.
Total Group funds under management were £86.3bn at 31 March, up 5% on 31 December.
Mr Loney said: “This is a very strong set of numbers, which comes on top of last year’s record results. In the key areas of pensions and protection we continue to increase market share. The fact that we continue to do so is a result of our investment in the quality of our product and service proposition.”
Mr Loney’s recommendations to the new pensions minister are:
1. The rapid introduction of a new “cheap and cheerful” regulated advice regime which makes focused financial advice affordable for all and ensures that the pension freedoms achieve their true potential.
2. A thoughtful review of the current system and levels of tax relief available on pension contributions before any changes are made. It is simply not fair that income which is saved for the future should be taxed twice.
3. A gradualist approach to increasing the level of contributions that employees make to auto enrolled pension schemes so that we nudge younger savers, with help from their employers, towards saving around 15% of income that is generally needed to properly provide for later life.
4. Legislation to make an open market approach to annuity sales compulsory so that customers can access the best deals available. Legislation should also ensure that consumers are protected when engaging in any secondary annuity market through a requirement to obtain financial advice before cashing in their annuity.
5. Consolidating the Money Advice Service and The Pension Advisory Service into a single truly excellent financial education service for all, which works hand in hand with advisors and providers to build financial literacy.”