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Pension charge cap to cost Aegon up to £25m a year

Aegon estimates the pensions charge cap will cost the business up to £25m a year.

The Department for Work and Pensions confirmed in March that any scheme with a charge of over 0.75 per cent would not be eligible for auto-enrolment from April 2015.

Aegon announced a month later it would apply the charge cap on all business written from 31 August.

In its quarterly results published yesterday, it says it estimates the cap will cost between £20 and £25m annually.

It adds following the FCA’s announcement of its review into closed book business, it will be moving to “upgrade its traditional policies onto its platform”.

Pre-tax earnings for the quarter were £22m. Aegon says assets on the platform have reached £1.6bn, up from £200m in Q1 2013. It adds that revenue is small but growing.

Earnings from the life business were flat year on year £18m while earnings from pensions doubled from £2m to £4m.

The business took 43,000 new policies in Q1 including 29,000 new pensions scheme members through auto-enrolment.

The business says it expects platform assets to grow significantly this year following the launch of its D2C pension and Isa platform.

Aegon chief executive Adrian Grace says: ”The most important thing is intermediaries, our core partners, see it as a solution for them as well.

“What they have got is a lot of low-value clients and don’t know what to do with them, suddenly they can give those clients to Retiready and in time, when the client needs advice, we can refer them back to the intermediary.

“The UK pensions industry is undergoing a period of significant change but we believe the Government’s decision to put more power in the hands of the consumer at this year’s Budget was a positive step and one that supports our current strategy. In the first quarter of 2014 the business delivered stronger earnings than at any point last year and this has set us up well for the year ahead, particularly as we begin delivering services to customers in a new way.” 

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 16th May 2014 at 2:39 pm

    If the charge cap’s going to cost them £25m a year then they’re stupid trying to compete in the AE arena, just as they were stupid trying to compete in the stakeholder arena.

    At least 10 years ago I attended an AEGON presentation on pensions and afterwards got chatting with one of the team, amongst other things about stakeholder, on which he readily admitted they were losing a fortune. So why did you bother offering any stakeholder products? He had no answer, yet here they are doing it all over again, just like most of the other traditional providers. Oh well, it’ll be their funeral.

  2. Julian Stevens 19th May 2014 at 10:08 am

    Apart from that, what’s Adrian Grace smiling about?

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