LV= takes big hit from Osborne’s new annuity rules as profit drops
A DOUBLE-whammy of low interest rates and chancellor George Osborne’s overhaul of Britain’s pensions industry have hit profits at mutual insurer LV=.
The cricket and rugby sponsor saw pre-tax profits plummet 76 per cent to £37m last year after lower returns in its investment portfolio.
Although pension sales were up to £63m from the £587m in 2013, overall annuity sales suffered and LV= saw a fall to £387m from £457m.
This was a marked difference from LV=’s financial statement for the six months ended 30 June 2014, where the company reported surprisingly strong annuity sales, in contrast to its rivals.
From next month, savers will be given more freedom with their retirement pots.
Mike Rogers, chief executive, said: “While we are excited about the potential going forwards, we saw significantly lower new business volumes and profit contribution from enhanced annuities as customer behaviours started to change and people deferred making decisions until changes come into force. The impact on enhanced annuities was, however, partially offset by strong performance in other business lines, particularly equity release and protection.
“We believe that our expertise in enhanced annuities, pension drawdown, and equity release, coupled with our status as Britain’s most recommended insurer will enable us to compete strongly in the new retirement landscape.”