Royal London’s H1 group pensions new business rose by a third year-on-year, and the provider says a secondary market in auto-enrolment scheme switching is beginning to emerge.
Royal London’s group pensions sales rose 32 per cent to £2.5bn in H1 2017, up from £1.9bn in H1 of 2016. The provider put the increase down to more members joining schemes as a result of auto-enrolment, increased transfer values driven by positive stock market performance and higher quality schemes being won with larger average member numbers and contributions.
Royal London says it expects a slowdown in workplace pensions in H2 of this year as the pipeline of schemes from auto-enrolment dries up. But it says it intends to focus on a ‘slowly emerging’ secondary market, where advisers recommend schemes move to take advantage of better quality scheme administration or investment options.
Royal London group chief executive Phil Loney has also hit out at competitors for allowing customers to ‘sleepwalk’ into poor quality drawdown products, echoing some of the bad practices of the annuity sector. Loney has also called for legislation to introduce a mandatory requirement for all providers to connect to the pensions dashboard.
Royal London is also establishing a presence in Dublin to ensure its business in the Republic of Ireland is protected post-Brexit.
Loney says: “During 2017 we have consolidated our position as one of the new business leaders in the retail protection, pension and drawdown markets, and as one of the main providers of new workplace pension schemes entering auto-enrolment.
“Recent FCA data confirmed a significant rise in Income Drawdown business across the market since the introduction of ‘pension freedoms’ in 2015. The data revealed a particular surge in non-advised Drawdown sales. We think this is concerning as the best outcome for customers when choosing an income drawdown strategy generally occurs when they take financial advice, as the decisions are complex and can form a significant part of an individual’s retirement income. We are pleased that the FCA is looking at this area more closely, and our view is that they should do more to encourage individuals to take impartial financial advice when contemplating Income Drawdown.
“We are also concerned that some providers may be “sleep-walking” their existing non-advised pension customers into their own in-house drawdown offerings, repeating some of the poor practice seen in the historic annuity market.
“Royal London intends to develop a better value for money drawdown offering and tools for those clients who insist on the non-advised route, but such competition will only be a viable solution if the FCA takes action to open this part of the market up to competition.
“We also believe that the pensions dashboard has the potential to boost competition in the UK pensions market. It is an important project designed to help customers by allowing savers and their advisers to have a comprehensive view of their pension savings and entitlements in one place to determine their retirement income. The dashboard could also provide a useful starting point for those advisers and customers seeking to obtain better value for money by consolidating numerous small pension pots. There is currently no legislation to ensure that all pension providers make their data available to the dashboard, which may create gaps in the data available causing the project to fail. We believe it is imperative that the Government legislates to mandate participation in the pensions dashboard as a key step to underpin greater competitive rivalry in the UK pensions sector which will in turn drive better value for money for consumers.
“During the first half of 2017 Article 50 was triggered and the process commenced for the UK to leave the European Union (EU). We are in the process of domiciling a subsidiary in Ireland to enable our business in the Republic of Ireland to continue to trade and to mitigate any uncertainty. We expect to maintain strong capitalisation and profitability as the UK leaves the EU.”