Financial advisers are set to benefit from a “windfall” sparked by recent pension reforms, according to the chief executive of insurer Aegon UK.
Adrian Grace said the industry has witnessed a “pension perfect storm” as a result of freedoms ushered in by Chancellor George Osborne, allowing those aged over 55 to take their entire pension pot as a cash lump sum.
“Next month’s Budget could see significant changes to pensions tax relief, adding further demand for advice, particularly from higher rate tax payers looking to optimise their savings,” Grace said.
“Combined with one of the most volatile starts to the year in recent stock market history, the value of advice to balance security with flexibility has never been greater.”
His comments came as Edinburgh-based Aegon UK reported underlying pre-tax earnings of £19 million for the fourth quarter of 2015 – in line with the previous three-month period but down 17 per cent on a year earlier. Fee revenues fell 10 per cent year-on-year to £98m, which the life and pensions firm attributed to lower margins as a result of its drive to switch more customers to its online “platform” system.
Grace told The Scotsman: “There is undoubtedly pressure on the revenue line. But operating expenses were down 43 per cent to £66m.”
He said the fall in costs was linked to increasing take-up for the platform, which saw its assets under administration more than double to £6.4 billion and is a “more efficient way of doing business”.
“The digitisation of the back end means we can drive down costs, which is in some ways substituting for the fact that revenues are down,” Grace said.
Some 44,000 new customers were added to the platform in the fourth quarter, including those “upgraded” from older products, taking the total to almost 243,000.
Aegon UK, based at Edinburgh Park on the western outskirts of the city, employs about 2,300 people and the Dutch-owned company last year pledged its “long-term commitment” to the UK market after admitting it was considering the sale of its annuities operation. The entire pensions industry is having to come to terms with rules that mean retirees are no longer forced to buy annuities with their savings.
However, Grace said that annuities “still have a place” in the market, as they provide a certainty of income not offered by some products that leave savers’ pension pots invested in stocks and shares.
He added that the review into the future of the company’s annuity portfolio was ongoing, “but there’s no smoke from the Sistine Chapel just yet”.