Royal London turns in strong 2017 but pleads for freeze on pensions changes

● Firm’s new life and pensions business tops £12bn in ‘more stable’ conditions

Life and pensions group Royal London unveiled robust 2017 results yesterday, as its boss called on the government for a five-year freeze on changes to pension tax relief.

Group chief executive Phil Loney, unveiling a 17 per cent rise in operating profits to £329 million, said the pensions landscape had seen “revolutionary and largely positive changes” but greater stability was needed.

“Pensions tax relief has been subject to no less than six cuts in the last seven years and we are asking the government to commit to a five-year moratorium on further changes,” Loney said.

“Governments are playing around with pensions every year and that really undermines public confidence. We don’t want to put them off saving because of what’s being done repeatedly on pensions tax relief.

“We need a period of pensions being boring and reliable again.”

It came as Royal London, which employs 1,100 in Edinburgh and 100 in Glasgow, reported that new life and pensions business rose 38 per cent to £12 billion last year, up from £8.7bn in 2016.

Funds under management lifted 14 per cent to £114bn, as Loney added that market conditions were more stable than in 2016. “We had fewer political surprises last year, the Brexit fallout is over whereas we were caught off guard (by the Leave vote) in 2016, and sterling has recovered,” Loney added.

He said he was particularly pleased that Royal London had virtually doubled in size in terms of funds under management in the past six years, and that in its main markets it was now the second or third biggest player “compared with sixth or seventh in 2011”.

He added that Royal London Asset Management had continued to perform well, with gross inflows of £10.4bn, up from £6.7bn in the previous 12 months.

The mutual completed one of the biggest ever launches of a UK property fund last October, with a portfolio of £2.7bn.

Loney said the completion of the initial stage of pensions auto-enrolment meant the group expected lower sales from this area in 2018, but would work to help customers adjust to higher rates of joint contributions with employers.

The joint contribution rate rises to 5 per cent next month and 8 per cent in 2019, but Loney said the target contribution in the medium to longer term “should be about 14 per cent”.

Royal London’s profit share distribution to eligible members rose to £142m last year, up from £114m in 2016.