Royal London's AUM has hit a record £212 billion, an increase from £199 billion at the end of last year, attributed to solid market performance and a steady flow of pension capital, even in the face of global uncertainties.
While gross inflows remained stable at £22.4 billion, net inflows saw a sharp decline, dropping from £4.1 billion to £1.8 billion. This dip is largely attributed to a significant one-time boost in the previous year when the company secured a £4.6 billion multi-asset mandate with St James’s Place. That win had elevated the numbers for that period, and with its effect now past, the current figures reflect a more typical trend.
Royal London’s operating profit rose by 13% to £187 million, thanks to robust performance across its protection and workplace pension divisions. New pension business sales hit £4.7 billion, marking a 5% increase compared to the prior year. The company also welcomed 112,000 new customers, bringing the total to 2.3 million. Much of this growth is attributed to workplace pension customers transferring old pensions into new schemes and a growing interest in retirement planning.
Major tax change fuels life insurance demand
Protection sales increased by 6% to £438 million, with a notable surge among high-net-worth clients. These customers are purchasing life insurance to prepare for the significant changes to the pension system in 2027. Starting the next financial year, pensions will be included in the inheritance tax net, prompting many to secure insurance policies that will cover potential tax liabilities.
During the first half of the year, Royal London paid out 98% of all protection claims, totaling £392 million in customer payouts. CEO Barry O’Dwyer explained that the rise in protection business is a result of clients consolidating multiple pensions into single accounts and preparing for the coming tax changes. He emphasized that the inheritance tax threshold is relatively low, pushing many to plan ahead with life insurance to ensure their families are protected.
The mutual reported a 15% increase in workplace assets under management, reaching £43.6 billion. This growth is driven by a combination of new members entering the market and larger transfer volumes. O’Dwyer noted that the current environment has led to a renewed focus on retirement planning, as people look to optimize their savings before the upcoming regulatory shift.
With these developments, Royal London is well-positioned to manage the evolving pension landscape. Its resilience in a volatile global market, combined with proactive customer engagement, underscores its continued strength in the financial services sector.
The mass scramble among UK pension savers to avoid being pulled into the inheritance tax net shows “no sign of slowing down”, as the policy shakeup creeps closer. From April 2027, pensions will be included in the scope of inheritance tax (IHT), meaning unused funds and death benefits will count towards the value of a person’s estate for tax purposes. The overhaul of the long-standing IHT exemption for defined contribution pots – combined with frozen tax thresholds which have dragged more-middle earners into higher bands – means thousands of additional estates are set to be tangled in the tax net. This has caused an uptick of activity in the pension market. Barry O’Dwyer, chief executive of Royal London, expects this to persist beyond the April 2027 start date. He said: “It has been happening because obviously people have known that this is coming for quite some time. “I don’t think we see any sign of it calming down or slowing down in any way. I think it is going to be here for the next couple of years at least.”
O’Dwyer also reiterated the firm’s commitment to its Targeted Support scheme, which provides tailored investment advice to customers. Royal London was the first provider to roll out the service, which is aimed at bridging the financial advice gap. The scheme, which is for the mutual’s stocks and shares ISA, has supported 5,000 customers since launch. The group is now working to extend the scheme into its pension offerings. The Royal London boss said Burnham’s newly announced social care policies, coupled with growing life expectancy, are also likely to increase the number of people saving into pensions, making support in this market crucial going forward.