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Lloyds TSB rescues Abbey Life with £176m package

Lloyds TSB has paid £174m to rescue subsidiary Abbey Life from a solvency crisis caused by the guaranteed annuities and the pension review.

Abbey Life suffered a massive increase in liabilities in 1998 brought about by the cost of meeting annuity guarantees and the increasing cost of the pension misselling review.

The scale of the crisis came to light in Lloyds TSB&#39s recently released Treasury returns. The bank is currently in the process of buying Scottish Widows, which also has a high guaranteed annuities liability.

The returns show that as the annuity liability grew, solvency was eroded until Abbey Life had no solvency left

At the end of 1997 Abbey Life free assets stood at £102m. But by the end of 1998 the annuity provision meant that the life office&#39s balance sheet was £68m in the red.

This was in direct contravention of the insurance companies act and forced Lloyds to step in.

Abbey Life appointed actuary Michael Green says: &#34The solvency position for Abbey Life changed because of the Government actuary&#39s view that additional resources were need to cover aunnuity guarantees and the higher cost of the pesion review.&#34

Industry analyst Ned Cazalet of Cazalet Financial Consulting says: &#34What with Abbey Life&#39s exposure to pension misselling too, Lloyds have had to bite the bullet quite a lot with its subsidiary over the last year.&#34


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David Cameron appoints former adviser to Tony Blair as new pensions minister

Following a cabinet reshuffle in light of last week’s general election, David Cameron has announced that Ros Altmann will be replacing Steve Webb as pensions minister. As the industry works with one of the largest reforms to the sector in almost a century, the former adviser to Tony Blair has been tasked with ensuring that the pensions revolution does not stray off track.


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