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Friends Life sees challenges ahead for corporate plans

Friends Life has admitted that the corporate pension market will be challenging as it looks to roll out a workplace savings offering by the end of the year.

Corporate pension sales across the Resolution group, which incorporates BHA, Friends Provident and Axa’s UK life business, increased by 7 per cent to £330m in 2010 from £308m in 2009, according to the group’s preliminary results.

Bupa Health Assurance chief executive Steve Payne, who will be given a new role as part of the Friends Life rebrand, says regulatory change and competition mean there will be pressures on company profit margins in the sector this year.

He says: “We think the corporate pension market will be challenging this year as the regulatory landscape continues to evolve. It is also a fiercely competitive market area and the dynamics of the market are such that there is pressure on company costs in the sector. Then you have got competing intermediaries and employee benefit consultants who are also looking to drive value for clients.”

Resolution reported operating profits of £275m, up from £6m in 2009, although the group says this figure was “skewed” by acquisitions.

Resolution also revealed a 15 per cent boost in its final dividend to 12.57p per ord- inary share. It intends to increase the 2011 dividend to 18.85p after available shareholder cash increased to £1,067m at the end of 2010 from £510m at December 31, 2009.

Chief executive John Tiner last week refused to rule out further acquisitions after the company said there are opportunities for consolidation in the asset management sector.

Resolution also reaffirmed its intention to compete more aggressively in individual pensions through the Friends Life annuity business and plans to “examine options”, with a view to entering the open market option sector.

Hargreaves Lansdown pensions analyst Laith Khalaf says: “This could be good news but the question is, how competitive is Friends going to be? If it grabs the bull by the horns and enters the annuity market as a properly competitive player, then that would be good for customers because the more people you have got competing, the better the rates.”

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