Royal London's group pensions business soars 32% as it plans Irish base

The provider said this was driven by members moving into existing schemes, increased transfer activity, and an uptick in "higher quality schemes being won with larger average member numbers and contributions".

However, it warned that workplace pensions business would soon begin to decline rapidly, especially as the staging of auto-enrolment (AE) begins to wind up. In particular, it said some of the remaining employers to stage are not making "adviser-led decisions", and therefore expects business in this area to be lower in H2.

It instead plans to focus on the secondary market, capitalising on adviser-led movements of schemes, where employers are seeking better quality administration or investment option, an area that has "started to emerge".

It also saw a 64% surge in its individual drawdown and pensions new business in the first half of the year. Sales in this area grew from £1.8bn in the first half of 2016, to £2.9bn by 30 June this year. The mutual insurer and pension provider said the "strong" performance was due to "significant success", particularly with its drawdown governance service, and the growth in the overall market size.

Group chief executive Phil Loney said in a statement that the firm had "consolidated" its position within the pension and drawdown markets, and as an AE provider.

However, he expressed concern that income drawdown was increasingly being purchased without financial advice since the introduction of Freedom and Choice in 2015, echoing a finding in Financial Conduct Authority's (FCA) data earlier this year.

"This is concerning as the best outcome for customers when choosing an income drawdown strategy generally occurs when they take financial advice, as the decisions are complex and can form a significant part of an individual's retirement income," he said. "We are pleased that the FCA is looking at this area more closely, and our view is that they should do more to encourage individuals to take impartial financial advice when contemplating income drawdown.

"We are also concerned that some providers may be ‘sleep-walking' their existing non-advised pension customers into their own in-house drawdown offerings, repeating some of the poor practice seen in the historic annuity market. Royal London intends to develop a better value for money drawdown offering and tools for those clients who insist on the non-advised route, but such competition will only be a viable solution if the FCA takes action to open this part of the market up to competition."

Irish subsidiary

The report also revealed the firm is in the process of domiciling a subsidiary base in Ireland to enable to "mitigate any uncertainty for Royal London from the UK leaving the EU". The firm's A2 insurance financial strength rating was reaffirmed by Moody's in June, with its outlook also improving from negative to stable, while Brexit is expected to have a "moderate" impact on the insurer over the next 12 to 18 months.

Although the firm said it is "confident that there is no significant impact" to its operations or capital, Loney said an Irish base was important to "maintain strong capitalisation and profitability" post-Brexit.

The growth in new business in H1 has also led the firm's asset management arm (RLAM) to see funds under management grow slightly from £100bn to £106bn over the last 12 months, thanks to more stable market conditions.

Meanwhile institutional gross inflows to RLAM more than tripled compared to last year, rising from £1bn in H1 2016 to £3.1bn in the same period this year.

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• Topics
• Defined Contribution
• Royal London
• Royal London Asset Management
• income drawdown
• AE
• Auto-enrolment