Pension transfer activity doubled to represent 40 per cent of LV’s new business in 2017, reaching £600m, the managing director for life and pensions has said.
John Perks told FTAdviser this inflow of new business from people transferring out of their company defined benefit (DB) pensions to defined contribution (DC) schemes run by LV was entirely due to external financial advisers.
He said: “Historically, we have been strong in the transfer market, because we service advisers, we have seen that double from 20 per cent of our business to about 40 per cent."
He attributed the increase to pensions freedoms, a rule change three years ago that gave people much more flexibility to transfer out of defined benefit pension schemes which provide a guaranteed income for life, and instead access their cash in one go via a defined contribution scheme.
“[The rise ion our transfer business] is partly due to pension freedoms, which has obviously increased the ability of people to move money," he said.
“We have also seen larger schemes that have time bound transfer processes, and also, we are hearing from many advisers that they have been quite swamped with DB requests, and therefore they are not writing as much DC business.”
Overall, LV saw its life and pensions operating profits almost triple in 2017, reaching £37m.
Even though Mr Perks considers the transfer business to be at a peak, he is expecting that the high level of activity will continue for some years.
The volume of DB transfers has been soaring, as savers seek to take advantage of sky-high transfer values and to move their nest eggs into DC schemes in order to access their cash using pension freedoms.
According to figures from the Office of National Statistics (ONS), funds transferred out of pension schemes almost tripled to a record £34.2bn in 2017.
The provider also saw a growth in income from its retirement robo-advice services, with an increase of 25 per cent year-on-year.
According to Mr Perks, LV had a gross revenue of £4m in 2017 in this business.
LV acquired a majority stake in robo-adviser Wealth Wizards in 2015, and launched a robo-paraplanner tool last May, which helps firms provide retirement advice in less than two hours.
Mr Perks said: “We invested in our robo-advice solutions, in particular in our robo-paraplanner, and we are able to get three times the efficiencies in our processes.
“Because of that at retirement capability, we have been focusing on corporate schemes and employment benefit consultants around helping their customer basis to access the right DC to DC and sometimes DB to DC advice at retirement.
“We have seen growth there, we have won a series of tenders in that market and we continue to expand there, and we will be able to announce some large corporate partner deals soon.”
LV is expecting to achieve breakeven on its robo-advice investment this year.
Regarding Wealth Wizards, Mr Perks said that the company has had “particular success with a number of high profile deals that they are working on, and that they haven't announced to the market”.
This has allowed the firm “invest further in their growth, so they are on a very positive trend,” he concluded.
maria.espadinha@ft.com
