Royal London’s group chief executive has called on the chancellor to give up on plans to turn pensions into Isas in this year’s Budget, stating “this is not the time to turn the system upside down”.
Using the opportunity of the mutual’s annual results statement to make his point, Phil Loney argued the conclusions of the government’s consultation on pensions tax relief should aim for reformation of the current system, rather than complete abandonment.
“He [George Osborne] should not take the huge gamble of introducing Isa-style pensions, which would be reckless at a time when the numbers saving into a workplace pension are finally growing, following the successful introduction of automatic enrolment.”
Mr Loney said there remains a considerable risk that moving away from the existing taxed exempt exempt system, even with an incentive thrown in, would turn people away from long-term saving.
“Savers will lose the certainty of a tax relief system which ensures their saved income is not taxed twice, and be thrown into an Isa-style system where they need to believe that future generations of politicians will not renege on the deal and tax their savings when they come to withdraw.”
As for the group’s results for the 12 months ending 31 December 2015, new life and pensions business of £6.7bn was up 40 per cent on the full year 2014 figure, driven by drawdown inflows up by over two thirds to £1.3bn.
Group pension new business stood at £2.7bn at the year end, up 27 per cent on 2014, while individual pensions were at £1.9bn, up 39 per cent from the previous year.
This meant Royal London’s total funds under management were £84.5bn at the turn of the year, up 2.7 per cent on the £82.3bn at 31 December 2014; despite a year of turbulent markets.
The statement noted that individual pensions continue to prosper from the pension freedoms, with income release continuing to be the market leading simplified drawdown proposition for advisers, seeing new business up 67 per cent on the same period in 2014.
Workplace pensions also delivered strong sales growth on the back of auto-enrolment, with a healthy outlook, given the increased volumes of much smaller workplace pension schemes staging this year.
“However, since smaller employers are the main focus of auto-enrolment in 2016, we expect the overall premiums achieved from these schemes as measured by present value of new business premiums to reduce compared with the company record achieved in 2015,” added the results.
As for the intermediary protections business, new business volumes were up 49 per cent to £502m on the same period last year, with sales driven through changes to products to provide further enhancements in cover.
Mr Loney said “heavy investment” in the adviser-led protection business was starting to pay off.
Royal London Asset Management saw gross inflows of £3.1bn - although this figure was down from £3.8bn at 31 December 2014 - while the Ascentric wrap platform saw gross sales of £2.5bn - up 14 per cent from £2.2bn the previous year.