Scottish Life managed to announce an eight per cent increase in life and pensions business for the half year ending June 2006 and have a pop at its competitors in one breath.
With total new life and pensions business on a present value of new business at Royal London increasing by 15 per cent to 949m the firm made a back-handed swipe to rivals chasing market volume and indicated that it would not be dragged into a price war to plump up its figures.
Group finance director at Royal London Stephen Shone said: “In the pensions market, Scottish Life has continued to very deliberately target profitable new business. We have taken a firm decision that we will not destroy capital by writing business which can only ever be profitable on paper – and then only if unrealistic assumptions are made about
Shone added that IFAs are increasingly using its fee payment system to help build a sustainable business model, without the need to regularly rebroke pension plans around the market.
Some cynics might suggest the firm is justifying its relatively modest growth in new business compared to the 39 per cent boost in total life and pensions sales at Friends Provident, for example.
But Royal London group media communications director Alasdair Buchanan says many of its rivals are writing unsustainable, low level business offering high commissions. Buchanan says this is indicative of the persistency problems highlighted in Ned Cazalet’s Polly Put the Kettle on Report, with IFAs understandably shifting their clients between policies to chase better deals once they move beyond the clawback period. As Cazalet pointed out in his report, with many policies taking ten years to make any profit, this rebroking is having a negative impact on life offices.
Meanwhile Work and Pensions Secretary John Hutton gave fresh hope to the 125,000 workers which lost their savings when the pensions schemes collapsed. In an interview on BBC Radio 4 over the weekend Hutton revealed he is working on plans to restore a state second pension – which the victims would have opted out of when they joined their employers’ scheme – for some of those affected. He said the department is also pursuing the companies that had folded their schemes despite being still solvent.
Hutton said he is “looking urgently to see if we can find a way forward” and added: “If you can’t recover or restore the occupational pension, we might be able to restore the rights to the state second pension.”
Hutton’s proposals, however adequate or inadequate they prove to be, at least show it will not be able to wriggle out of doing something to compensate workers for its own failings identified by the parliamentary ombudsman.