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Group pension plunge hits life companies

Life companies saw group pension sales plummet last year as rises in unemployment and salary freezes took their toll.

Aviva was the worst hit of the providers reporting new business figures last week. It saw group pension business plunge by 55 per cent to £462m from over £1bn in 2008.

Mutual Royal London saw the present value of new business premiums on Scottish Life group pensions fall by 19 per cent to £342m in 2009, from £422m the previous year.

Standard Life weathered the storm better, with net flows and new business sales staying steady at £1.5bn and £2.6bn.

Standard and Aviva both say lower salary increases, lower recruitment and unemployment across the UK combined with lower average asset values as the reasons increments to existing schemes, which represent the majority of sales, reduced in 2009.

Both also recorded fewer large-scheme wins.

But Royal London claims its poor performance was a result of “unsustainable commission” rates being paid by its rivals on group pensions business, adding that this distorted the market in 2009.

Chief executive John Deane says: “I think that the FSA in the RDR paper has been quite clear that it sees biases being generated by commission in group schemes. We strongly believe the economic basis on which some of those schemes are written is not viable so we do not play the commission game but our business levels have suffered as a result.”

The mutual expects sales to improve in 2010 as the RDR draws closer.

Standard Life bucked the trend with its group Sipp. The firm says volumes in the product increased by 61 per cent and accounted for more than half of its total group pension sales for the year compared with 33 per cent in 2008.

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