Pensions firm Aegon UK has blamed sweeping industry reforms for a 20 per cent drop in first-quarter profits, despite enjoying a surge in sales.
The Edinburgh-based group also pledged its commitment to its financial advice businesses, which saw their losses double compared with last year.
Chief executive Adrian Grace told The Scotsman that the firm had decided not to take part in a “feeding frenzy” for business ahead of the retail distribution review, which banned commission payments to advisers at the turn of the year.
He said: “We didn’t want to pay the levels of commission that some of our competitors were, so we decided to let some business go. It was a very deliberate decision on our part.”
The strategy saw underlying pre-tax profits fall to £20 million, down from £25m a year ago, but Grace said other regulatory changes, such as auto-enrolment rules forcing employers to provide pension schemes for their staff, offered “significant” growth prospects.
Aegon runs 31,000 group pension schemes, covering almost one million members, and while rival Standard Life expects to win as many as 400,000 extra savers through auto-enrolment, Grace said: “We’re going for value rather than market share.”
New business sales grew 37 per cent to £244m, which Grace attributed to a smooth transition from the old regulatory regime and strong demand from customers and advisers for Aegon Retirement Choices, the group’s online product offering.
He also said the firm has seen “phenomenal” demand for income drawdown products, which allow customers’ funds to remain invested in the stock market while they take an income in retirement, because the value offered by conventional annuities is “appalling”.
Losses at the Origen and Positive Solutions financial advice networks widened to £2m, from £1m a year ago, and while Grace admitted the group was keeping an eye on the market, he said: “It’s highly unlikely that we would want to sell them. They give us a really good insight and we see them as part of our future.”