Aegon profits rise ahead of shake-up

Insurance group Aegon UK has insisted it is in a “really good position” to benefit from sweeping changes to the pension landscape next year after reporting a 13 per cent rise in profits.
Aegon UK chief executive Adrian GraceAegon UK chief executive Adrian Grace
Aegon UK chief executive Adrian Grace

However, the Edinburgh-based life and pensions firm again warned it faces an annual hit of up to £25 million from a looming cap on charges for workplace schemes.

Despite the predicted knock to earnings, chief executive ­Adrian Grace told The Scotsman the company is “supportive of all of the initiatives the government is putting in place”.

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He added: “2014 has seen a legislative revolution across the pensions industry. This, paired with the referendum in September and an ever-growing need to help people get ready for their retirement, has made for a challenging year but an exciting one.”

The UK government is to introduce a 0.75 per cent limit on charges for auto-enrolment schemes in April, just as new rules come into force that mean people reaching retirement will no longer be forced to buy an annuity with their pension pot.

Grace said: “We’re ready now to help all of our clients with the new pension flexibilities.

“We have market-leading income drawdown and guaranteed products and have the only platform in the UK which provides solutions for advisers, workplace-based employees and non-advised customers to and through retirement. This puts us in a really good position for the changes in April.”

His comments came as Aegon UK, which employs about 2,000 people in Edinburgh, reported underlying pre-tax profits of £22m for the three months to September, up from £19m a year earlier. Total revenue-generating investments grew 3 per cent year-on-year to £58.9 billion.

During the quarter, the firm added 97 schemes through ­auto-enrolment – which compels employers to set up staff pension schemes – and gained about 59,000 extra customers. About 4.5 million people have now been placed into a workplace pension, says the Pension Regulator.

Aegon said it is implementing changes required to meet the 0.75 per cent workplace charge cap being introduced by the Department for Work and Pensions (DWP), but most of the work can only be done once the legislation has been finalised.

“As such, uncertainty remains on the full impact of the upcoming DWP regulation on Aegon’s income statement and capital position,” it said, adding the move is expected to knock £20m-£25m off its underlying earnings each year.

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Grace also said the business is closer to the point at which it could start paying dividends to its Dutch parent, although no timescales have been set. Aegon today posted a steeper-than-expected 47 per cent plunge in overall third-quarter earnings to €291m (£230m), mainly as a result of changes to its actuarial models.