LV transfers £600m in funds following Vanguard deal

LV transfers £600m in funds following Vanguard deal

Pensions provider LV is to transfer £600m in assets under management to investment manager Vanguard following a deal that will see Vanguard take over the management of 10 LV index funds.

The agreement will mean LV can offer competitive price propositions for its drawdown customers. 

The extended partnership with Vanguard will see a change in LV’s own-label life business index funds, with overall charges coming down by an average of 44 per cent.

The discount means four out of LV’s existing 10 funds are now half the existing price and all 10 have a lower investment charge.

Eight of the ten funds will move into existing Vanguard funds while two others - Balanced Index and Global Equity Tracker – have transitioned to tailored funds created by LV.

According to LV, the discounted range means its Balanced Index Fund has a total fund charge (TFC) of just 0.09 per cent. In a statement, LV said: "This, along with an adjustment on the underlying asset allocation from 80 per cent equities and 20 per cent bonds, to 60 per cent equities and 40 per cent bonds makes the Balanced Index Fund even more attractive for clients looking to consolidate their pensions."

The agreement with Vanguard comes as LV's half year results for 2018 showed a dip in its retirement and protection sales.

The mutual said the reduction of sales in the retirement business was due to the reduction of its defined benefit (DB) to defined contribution (DC) transfers, following record levels of transfers in 2017.

LV said that, following the agreement with Vanguard, it is expecting single figure growth as it looks to consolidate itself in the market.

John Perks, managing director of retirement solutions at LV, said: “We remain ambitious as a business and we will see where we get to in coming years.

“We have seen a slight dip in DB to DC transfers over the last year, but we will be expecting single figure growth in coming years as we look to consolidate and further invest in the market.”

Commenting on the dip in sales, Alan Chan, director and financial planner at IFS wealth and Pensions, said that the results were likely to be a side effect of LV's previous regime.  

“The results are likely be a hangover from the previous regime. Perhaps this is precisely the reason behind LV’s decision to restructure its business in the first place.”

LV said that its online advice service was helping its advisers and it is eyeing up more major contracts.

“Our online advice service is working very well and we are currently working on a couple of major contracts,” Mr Perks added.

“The online advice service is allowing us to touch a market that isn’t being advised, including customer partner customers that were in an annuity but now require advice. The technology is very appropriate for our heartland adviser market.”

However, LV has no plans to restart its suspended transfer value analysis service (TVAS). In April, FTAdviser reported that providers such as LV and Prudential withdrew their free TVAS service for advisers following an FCA clampdown on pension transfer tools.