Workplace pensions help life and pensions mutual Royal London notch up double-digit interim profit increase

Royal London, which says it is the UK's largest mutual life, pensions and investment firm, and is a major employer in Scotland, has cheered a double-digit increase in interim profit as its workplace pensions activity gained traction.

Group chief executive Barry O’Dwyer, who took the role in 2019 after more than three decades at the firm latterly known as Standard Life Aberdeen. Picture: contributed.

The group, which has offices in Edinburgh’s Haymarket and Glasgow city centre, has revealed how pre-tax operating profit increased to £127 million in the six months ended June 30 from £109m 12 months previously. It added that the jump was driven by growth in workplace pensions new business contribution and higher risk free rates, which increased the expected returns on its assets, as well as by further “cost discipline”.

Royal London in fact during the period welcomed 479 new workplace pension scheme employers and more than 120,000 new workplace pension customers in a “buoyant” employment market.

However, life and pensions new business sales retreated to £4.9bn from £5.5bn, attributed to higher interest rates corroding the present value of new business premiums, but net inflows grew to £3.2 billion from £2.8bn, driven by higher external net flows into its global equity strategies, while assets under management stepped up to £153bn from £147bn.

Royal London also pointed out that it shook hands with Aegon UK to buy its closed individual protection book of in excess of 400,000 policies, taking the number of protection policies it will look after over the 1.5 million threshold, saying this reinforces its position in the UK protection market.

Group chief executive Barry O’Dwyer, who took the role in 2019 after more than three decades at the firm latterly known as Standard Life Aberdeen, said: “In the first half of 2023 we delivered good growth in workplace pensions new business, and our net inflows increased 25 per cent to over £3.2bn. This growth, alongside our continued cost discipline, has helped to deliver a 16 per cent increase in operating profit.

“As many of our customers continue to come to terms with the increased cost of living and higher interest rates, our priority has been to help them navigate these challenges, while building their long-term financial resilience.

Value

"In April, we shared £155m in ProfitShare with over 2 million members, and the 120,000 new workplace pensions customers we have welcomed since the start of the year all became members and are eligible for future ProfitShare allocations. Our success in Workplace Pensions is driven by employers increasingly valuing the benefit as a key way of supporting their employees’ financial wellbeing.

Royal London can trace its roots back to February 1861, when Joseph Degge and Henry Ridge are said to have met in London in a coffee house on City Road to discuss the formation of a new organisation to help the poorest in society, and it was registered a couple of months later as The Royal London Friendly Society.

As the business grew, the decision was made in 1908 to convert it into a mutual, “and we’ve remained that way ever since”, while it acquired Scottish Life in 2001. Last year it announced that it was implementing a permanent annual £1,000 salary boost for staff earning less than £40,000 a year, saying: “A key element of our purpose is to help build our customers’ financial resilience – but this also extends to that of our colleagues.”