Lloyds Banking Group’s life and pensions business Scottish Widows has become the latest to confirm it will bring a new suite of at-retirement products to market in the wake of the new pensions freedoms.
In its half-year results published this morning (31 July), Lloyds admits to a fall in demand for annuities, especially after it extended the cooling-off period in the wake of the Budget, but it would be launching a new suite of products tailored to the new environment.
It says: “Following the recent Budget announcements, we have extended the cooling off period for our annuity clients and as anticipated, we have seen a reduction in demand.
“We will further develop our product range in the retirement market; with access to over 24 million retail customers and our broad product offerings, we are very well placed to support the retirement planning of our customers.”
In the aftermath of the Budget, FTAdviser reported that a number of firms, including Partnership and Prudential, were considering the launch of unit-linked guarantee products to meet expected demand for solutions that provide a blend of certainty and flexibility.
Dominic Grinstead, managing director of the largest existing provider of unit-linked products MetLife UK, said at the time that “everyone” would be looking at the products and that “all big life companies” were likely to move into the sector as they seek new business lines to replace lost revenues.
However, experts such as Mike Morrison, head of platform marketing at AJ Bell, and Tom McPhail, head of pension research at Hargreaves Lansdown, warned unit-linked guarantees might not offer savers value for money.
The three main unit-linked guarantee providers in the UK - Aegon, Axa Life Invest and Metlife - said their guarantees cost between 0.95 per cent to 1.5 per cent.
Speaking to FTAdviser, Mr McPhail, said: “I think that is a pretty high price to pay for a certainty that most people do not need most of the time.”
Lloyds’ results also revealed that profits in the life and pensions business fell by 18 per cent compared to the first six months of 2013 to £461m, in part reflecting the £100m Scottish Widows set aside to cover an expected hit from the auto-enrolment charge cap.
Lloyds’ statutory pre-tax profit was down by nearly 60 per cent during the first half of the year to £863m, after it was forced to set aside another £600m to compensate customers who were missold payment protection insurance.
The bank had already been attacked this week for its “highly reprehensible” behaviour in the Libor rate-rigging imbroglio by no less than the Bank of England, after it manipulated benchmark rates to cut the cost of a financial crisis rescue scheme, effectively costing the taxpayer millions.
On an underlying basis, results were significantly better than analysts expected, with profit surging by nearly a third to £3.8bn as impairment charges on bad loans plummeted.
