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Excessive inflation has offered a lift to the UK’s retirement sector, as rising pay awards improve the quantity that individuals are placing into their pension, based on FTSE 100 life insurance coverage group Phoenix.
Official knowledge final week confirmed UK wages grew at 7.8 per cent — the quickest tempo on document — within the three months to July as staff reacted to will increase in the price of residing by negotiating larger pay will increase with their employers. As a result of many office retirement schemes are immediately linked to salaries, any improve in pay results in larger pension contributions.
“Counter-intuitively, so far as our sector is anxious, the UK financial surroundings is accelerating our development, so we actually are feeling constructive in regards to the market drivers of development,” stated Phoenix’s chief government Andy Briggs in an interview with the Monetary Occasions.
Briggs additionally pointed to a booming marketplace for bulk buy annuities, during which corporations switch their outlined profit pension schemes to insurers comparable to Phoenix, spurred by rising rates of interest.
Increased rates of interest cut back the current worth of the schemes’ future liabilities, and so make pension switch offers extra reasonably priced for corporations. In response to consultants Lane Clark & Peacock, there was a document quantity of offers within the first half of the 12 months.
Briggs was additionally optimistic in regards to the prospect of extra mergers and acquisitions exercise. A lot of Phoenix’s development traditionally has come from acquisitions, including closed books of life insurance coverage enterprise to its personal operations. Within the first half of the 12 months, the corporate accomplished the £250mn acquisition of Solar Lifetime of Canada UK, and Briggs expects extra offers as inflation provides to life insurers’ prices.
His feedback got here as Phoenix reported abridged outcomes for the primary half of the 12 months. New enterprise internet fund flows, a measure of the quantity of latest cash that the corporate was given to handle, rose 72 per cent to £3.1bn.
General, Phoenix’s working companies generated £898mn of money. That was down on the £950mn delivered in the identical interval final 12 months, however the firm stated the determine for the total 12 months could be on the prime finish of its goal vary of £1.3bn to £1.4bn.
The primary-half dividend was elevated by 5 per cent to 26p per share.
Phoenix has delayed the publication of a full set of accounts for the primary half of the 12 months till subsequent week, blaming the “operational complexity” of the transition to the brand new IFRS 17 accounting customary.
Phoenix shares rose by just below 1 per cent in early buying and selling on Monday.