Aegon blames regulation changes for sales slump

LIFE and pensions firm Aegon UK has blamed looming regulatory changes for a drop in third-quarter sales, but its profits more than doubled thanks to cost-cutting measures and better investment returns.

The Edinburgh-based group said the retail distribution review (RDR), which will ban commission payments to financial advisers from next year, led to a £4 million hit to earnings at its pensions arm. New business pensions sales dropped 8 per cent to £144m.

Underlying earnings at the firm’s Dutch parent company rose 31 per cent to €472m (£376.9m), ahead of analysts’ forecasts, although sales dipped 4 per cent to €1.55 billion.

Underlying pre-tax profits at Aegon UK soared to £20m for the three months to 30 September, up from £8m for the same period last year, as it benefited from a 30 per cent reduction in operating expenses to £73m. The firm launched a programme in June 2010 that aimed to take out £80m of annual costs, and chief executive Adrian Grace pledged that the “bold decisions” taken by management would deliver improved results.

Recent moves include the outsourcing of its final salary pension scheme operations to employee benefits specialist Jardine Lloyd Thompson, while Serco is to run its protection division.

Grace said: “These are a good solid set of results in the current environment that has been focused on transformation leading up to the huge changes the RDR will bring to this industry.”

Accounting firm Deloitte has warned that some 500,000 people in Scotland could be left without access to a financial adviser following the RDR, as they would be unable or unwilling to pay for advice up-front.

However, Clare Bousfield, chief financial officer at Aegon UK, said the group had launched a workplace savings platform aimed at plugging that gap.

The UK’s pensions market faces more upheaval through auto-enrolment, which will force employers to provide staff with a pension scheme. Large firms have already been swept up in the reforms, but the smallest do not have to comply until 2017.

Bousfield told The Scotsman: “The changes through RDR and auto-enrolment provide a great opportunity for us.”

Standard Life, which runs 35,000 corporate pension schemes, hopes to add about 400,000 savers through auto-enrolment, although sales of its corporate pensions tumbled 38 per cent to £635m in the third quarter as companies put their plans on hold.

Rival firm Scottish Life, owned by mutual group Royal London, said this week that it

expects to benefit from the changing regulatory landscape as it revealed a 2 per cent dip in pensions sales to £1.8 billion

for the nine months to 30

September.