Further evidence of a downturn in sales came when Scottish Amicable shut a third of its branches and made 140 sales staff redundant. A survey of 42 life offices by M&G Re also found that disclosure had cost the industry up to £250m, with 80 per cent of the companies reporting a drop in sales.
In June, IF A Promotion research revealed that 80 per cent of IFAs said disclosure had made no difference to their business. There was more good news when ABI figures for the first quarter showed that IFAs had increased their share of the life and pension market at the expense of company agents.
Meanwhile, Joanne Hindle was appointed head of the PIA pension unit after five years as IFA Promotion chief executive. The unit was setup to help investors and IFAs with the problem of reviewing past pension transfers and opt-outs.
The IFA Association and PI insurer LIBM sought a judicial review of the SIB report on pension transfers. The two bodies said that SIB’s guidance to IFAs, requiring them to write to clients about the mis-selling of personal pensions, was outside civil law and would invalidate their PI cover. The result of the review saw both sides claim victory as the High Court ruled that SIB’s statement on transfers was neither unlawful nor ultra vires and that SIB had acted reasonably in requiring all IFAs to carry out a review.
Nevertheless, the PIA pressed ahead with rules to enforce the SIB review and in June succeeded in watering down SIB’s guidelines on the pension transfer review process.
Sun Life said it was going to challenge the PIA in court over rule forcing life offices and companies to pay compensation for defunct IFAs that had never joined the trade body.
The year also saw the launch of a Corporate Bond Pep. And Scottish Mutual acquired the Pegasus Group for £8.3m in February, to form the insurer’s healthcare division. Pegasus head of sales and marketing Phil Wolski later left the merged company. Sir Mark Weinberg’s Life Assurance Holding Company, brought Crown Financial Management in a deal believed to be worth £40m, and Canada Life snapped up ManuLife’s UK operations for £120m.
But it was the antics of a rogue trader in the Singapore derivatives market that sent shockwaves around the world – and the collapse of Barings. Nick Leeson’s £900m derivatives losses crushed Barings which was only rescued by a £660m takeover by Dutch Bank ING.
The Virgin Pep was launched by Virgin Direct, a phone based joint venture with NU, and took £14m in the first three weeks. Another new arrival in the direct sales market was Marks & Spencer. The retail giant announced it would sell life and pension products on an execution-only basis in April.
January saw the shock departure of Prudential group chief executive Mick Newmarch and former Reed Elsevier chairman Peter Davis take his place. In May, Home Service managing director Jim Sutcliffe became chief executive of Prudential’s newly merged UK operations, with Prudential Financial Services chief executive Keith Bedell-Pearce appointed MD.