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How Aviva, SJP and Standard Life would cope with pension tax relief reform

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Aviva is expected to suffer less of a hit than St James’s Place and Standard Life if the Government decides to remove the higher rate of pension tax relief.

In an analyst note on Aviva published today, RBC Capital Markets warns the “inevitable” scrapping of higher rate tax relief on pensions would pose a “big potential threat” for the insurer.

However, the note says: “We expect Aviva to be less affected as it has a mass-market brand while Standard Life and SJP have higher-end brands. In addition, despite being the market leader the diversity of Aviva’s business means it is less exposed.”

RBC argues pension tax relief reform is inevitable due to the Government’s greater need for tax receipts after Brexit.

It adds: “The Government published a consultation on reducing the money purchase annual allowance. In this paper we believe the Government subtly sets out its intention to get rid of higher rate tax relief on pensions.”

RBC data estimates new pension business as a percentage of total business profit at SJP will fall to 34 per cent in 2018 from 37 per cent this year.

It predicts Standard Life will also see a 3 per cent drop from 25 per cent this year to 22 per cent in 2018.

Meanwhile, Aviva is likely to see a marginal decrease from 6 per cent to 5 per cent.

Legal & General was the only insurer that would see its pension profit increase with RBC estimating it would reach 6 per cent in 2018 from 4 per cent this year.

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