Royal London says new business up 10 percent in 2006

Royal London, the UK’s largest provider or mutual life and pensions coverage, said that it saw a 10 percent jump in new business in 2006. Single premium business was up to £491million from £469.1 million, while regular premium sales to individuals was lower, dropping from £186 million to £156 million last year. These results came in a year when demand has been strong generally.

Growth could have been higher, according to the company, but it is hesitant to pay high commissions for new business that it does not keep on the books long enough to turn a profit. It does not believe that new business that does not stay on the books for longer than four or five years is not a suitable business model because it is simply not profitable.

This is especially true, the company’s chief executive said, of the pensions market, which is very price-competitive. Because most pensions business is sold as a stakeholder product, if the buyer finds a better price and changes to a new plan with a new company, the company he or she is currently with must transfer the lump sum to the competitor without being able to deduct the cost of setting up and selling the pension. As it is, it can take 10 years or longer for a provider to replace the full cost of setting up a pension with the 1 percent management charge for Stakeholder Pensions.

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