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Auto-enrolment benefit for insurer

Royal London gains from pensions switch

Phil LoneyRoyal London has reported record new life and pensions business, driven by small providers of auto-enrolment policies switching to bigger companies.

Britain’s biggest mutual life business, which includes the former Scottish Life and Scottish Provident companies, expects auto-enrolment to slow down as the initial rush to sign up comes to an end.

Phil Loney, group chief executive, said: Today we are announcing a strong set of results delivered against the uncertain backdrop of the UK referendum on EU membership and continuing low interest rates. 

“Despite the reduction in interest rates, profit margins have held up well, allowing continued investment in the business to support the development of our product and servicing capabilities.

“We have indicated that we expect a slowing of the rate of growth in workplace pensions for some time and this indeed is beginning to come through in the new business figures. As smaller employers are now starting to auto-enrol the revenue from these schemes is lower than in earlier phases which were dominated by larger schemes.  

“Nonetheless the number of schemes continues to grow and new business growth in group pensions was ahead by 66% on the same half-year period in 2015. 

“As the auto-enrolled market matures we are beginning to see a new trend; the growth of a secondary market as advisers recommend schemes move to take advantage of better quality scheme administration or investment options. 

“Royal London has benefited from this trend, taking on schemes that have already auto-enrolled with other providers. This “flight to quality” introduces competition to the market and will result in better outcomes for scheme members.”

He said RLAM recorded a strong performance in the first half of 2016 with good gross and net inflows in sharp contrast to others in the asset management sector. Institutional business was particularly strong.

Highlights:

  • New life and pensions business up by 39% to £4,201m (30 June 2015:  £3,032m) which represents a new record for Royal London.

  •  Funds under management up by 11% to £93.8bn (31 December 2015: £84.5bn)

  • ·Intermediary Protection business up by 24% to £287m (30 June 2015: £231m)

  • Group Pensions up by 66% to £1,921m (30 June 2015: £1,155m);

  • Individual Pensions and Drawdown up by 17% to £1,783m (30 June 2015: £1,524m).

    Photo: Phil Loney (by Terry Murden)

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