Life and pensions business at LV= has been sharply hit by the impact of the Budget reforms, with underlying profit falling by 36 per cent, the firm’s interim half results show.
Underlying profit within the life and pensions division dropped from £11m in the first half of 2013 to £7m this year. LV= says this was primarily due to a drop in profits on enhanced annuity sales and increased sales of less profitable fixed-term annuities.
LV= also reported a 47 per cent drop in year-on-year pre-tax profits for the group, from £88m in the first half of 2013 to £47m this year. Group operating profit was up 18 per cent, to £39m.
“The reduced profit has primarily been driven by reducing margins on new business following the changes to pension freedom announced in the Budget in March,” LV= says. “As well as taking positive actions to help our customers immediately impacted by the Budget, we also quickly implemented some consumer focused initiatives including the launch of a new one year annuity and a new simplified drawdown product.”
Despite the fall in profits, there was an 11 per cent increase in retirement product sales, from £510m to £566m. With-profit sales hit £70m in the six months to June, up from £44m in the same period last year.
LV= group chief executive Mike Rogers says: “A degree of uncertainty will remain for our retirement solutions business until more clarity is provided on the new pensions landscape, however we are supportive of the Government’s decision to ensure that guidance offered to all retirees is provided independently as we believe this will help ensure the right consumer outcomes.”