Standard Life has reported a 15 per cent drop in pre-tax operating profits in its UK division in the first half of the year as the pension freedoms continue to take their toll on annuity business.
The insurer’s results for the first six months of 2015, published this morning, reveal year-on-year profits in the UK business dropped from £165m in the first half of 2014 to £141m this year.
This was driven by a £37m fall in the spread/risk margin, from £75m to £38m, “due to lower annuity sales and reduced benefit from asset liability management”.
The spread/risk margin is a measure of the profit from annuity business.
Some of this money appears to be flowing to the firm’s drawdown products in the wake of Osborne’s radical retirement overhaul in April, with drawdown assets under administration up 12 per cent, from £11.5bn at the end of 2014 to £12.9bn at the end of H1 2015.
Standard Life’s recently launched non-advised drawdown offering has so far attracted £140m of assets, the majority of which are managed by Standard Life Investments.
Fee-based revenue rose marginally year-on-year, from £303m to £314m, while UK fee new net inflows increase 21 per cent, from £1.5bn to £1.8bn.
Assets on the firm’s wrap platform were up 11 per cent, from £20.9bn at the end of 2014 to £23.3bn at the halfway point in 2015, while the number of adviser firms using the proposition increased from 1,340 to 1,405.
Total UK assets under administration were up 2 per cent year-on-year, from £20.9bn to £23.3bn.
The insurer’s asset management business, SLI, delivered a 51 per cent increase in pre-tax operating profits, from £102m to £154m. This was driven by the acquisition of Ignis and “strong net inflows into higher margin products including UK mutual funds and multi-asset investment solutions”.
Total assets under management at SLI increased marginally, from £245.9bn at the end of 2014 to £250bn at the end of H1 this year.
Standard Life chief executive David Nish, who will be replaced by SLI boss Keith Skeoch next month, says: “Our UK fee based propositions continue to build momentum with regular contributions into our workplace pensions up 15 per cent.
“The strength of these propositions, investment solutions and our market positioning means we have been able to help our customers with the new pensions regulations and continue to support them as saving for their futures becomes increasingly front of mind.
“It has been an absolute privilege to lead Standard Life for the last six years and to help build our business into the strong global player it is today. I wish Keith and the inspirational people across all of our group every success for the future. Standard Life is very well positioned to deliver ongoing growth and to help our customers and clients to save and invest, so that they can look forward to their financial futures with confidence.”