Pension freedoms drive Pru UK profits up 60%

Pension freedoms drive Pru UK profits up 60%

Increased demand for its retirement products in the wake of pension freedoms sent Prudential’s UK life arm profits 60 per cent higher last year, the company has reported.

Operating profits for its life business were £1.16bn in 2015, helped by a 23 per cent increase in life sales, which Prudential said was due to growing demand for its savings and retirement products in the first year those aged 55 and over were allowed access.

In particular, savers bought into the PruFund range, which launched new products during the year, including the PruFund Isa, Flexible Income Drawdown and its simplified non-advised drawdown Pension Choices Plan.

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From February 2015, the PruFund range of investment funds within an Isa wrapper generated sales of £73m, the company said, with assets under management totalling £674m at the end of December 2015.

In total across all products, PruFund sales of £574m increased by 82 per cent, with total assets under management having increased 42 per cent since the start of the year, to £16.5bn.

As a result, Prudential reported its retail business sales grew 32 per cent to £874m for the year, with related profits increasing by 31 per cent.

However, like much of the financial sector, the provider continued to be hampered by lower annuity sales, after chancellor George Osborne derided the products when he announced pension freedoms in 2014.

Sales of individual annuities fell by 46 per cent from 2014 levels to £57m, Prudential said, now representing just 7 per cent of retail sales.

M&G Investments, the Prudential group’s investment arm, saw another £3.5bn of net retail outflows in the final quarter of 2015, as negative sentiment on bonds took further toll on the business.

M&G’s total net outflows from retail clients hit £10.9bn last year.

UK clients accounted for 58.8 per cent of M&G’s retail business at the end of 2015, a rise in share of 4.1 percentage points from 2014.

The £3.5bn of net outflows in the final quarter was only a slight respite, falling by £438m from Q3 and by £475m from Q2.

Despite the outflows, M&G’s operating profit for the year totalled £442m, down just 1 per cent from the year before.

Prudential group chief executive Mike Wells said: “We continue to grow across our key metrics despite the macroeconomic uncertainty and the challenges presented by low long-term interest rates.

“After a period of exceptional growth, M&G had a more challenging year with retail net outflows more than offsetting positive flows from institutional new business.”