Change would be 'reckless' says mutual boss
Loney warns Chancellor against ISA style pension plan
After unveiling record results on the back of last year’s “freedoms”, Mr Loney warned Mr Osborne against changing the tax relief system with a move to ISA-style pensions.
“The critics of the perceived unfairness of the current system, where 75% of tax relief goes to high and additional rate tax-payers, have won the intellectual argument and Royal London has been a leader in calling for change,” he said.
“However it has never been true that all of the reform options are better than the status quo. It is my belief that proponents of the ‘ISA-style’ (or ‘TEE’) pension taxation are clearly thinking too short term.
“There remains a considerable risk that “ISA style” pensions, even with an incentive thrown in, will simply turn people away from long term saving. Savers will lose the certainty of a tax relief system which ensures their saved income is not taxed twice, and be thrown into an ISA-style system where they need to believe that future generations of politicians will not renege on the deal and tax their savings when they come to withdraw. Hands up anyone who really believes that?
“I strongly urge the Chancellor to build on his excellent record of introducing the pension freedoms by reforming the current tax relief system and not abandoning it. He should not take the huge gamble of introducing ISA-style pensions, which would be reckless at a time when the numbers saving into a workplace pension are finally growing, following the successful introduction of automatic enrolment. This is not the time to turn the system upside down.”
Royal London has benefited from the pension freedom reforms which have led to a huge leap in business to record levels over the last 12 months.
Britain’s biggest mutual, which owns Scottish Life, said it has achieved “outstanding new business growth in 2015”
In a statement it added: “It has been four years since we embarked on our new strategy. Since 2011, strategic changes including bringing together disparate brands under a single Royal London brand have resulted in growth across the board.”
Life and pensions new business grew 40% to £6.7 billion, a doubling of pensions sales over four years. Drawdown sales rose 67% to £1.3 billion while individual pension sales rose 39% to £1.9bn.
Auto-enrolment, which continues to be rolled out to small businesses, has also brought in new business. Royal London said it is “well placed for the increased volumes of much smaller workplace pension schemes anticipated in 2016.”
Group pension sales grew 27% to £2.7bn. The consumer life insurance business saw sales rocket 385% from £165 million. Inflows of funds under management fell from £3.8bn to £3.1 billion.
Protection intermediary new business volumes were up 49% to £502m on the same period last year. As previously announced, Bright Grey transferred to the Royal London brand during Q4 2015.
Mr Loney said: “To put this into context over the last four years sales from our life assurance range and pension range have more than doubled. Our asset management and platform business both saw good growth in total assets despite a very volatile market.”