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Excessive inflation has offered a lift to the UK’s retirement sector, as rising pay awards enhance the quantity that persons are placing into their pension, in line with FTSE 100 life insurance coverage group Phoenix.
Official information final week confirmed UK wages grew at 7.8 per cent — the quickest tempo on file — within the three months to July as staff reacted to will increase in the price of residing by negotiating greater pay will increase with their employers. As a result of many office retirement schemes are instantly linked to salaries, any enhance in pay results in greater pension contributions.
“Counter-intuitively, so far as our sector is anxious, the UK financial setting is accelerating our development, so we actually are feeling constructive concerning the market drivers of development,” mentioned Phoenix’s chief govt Andy Briggs in an interview with the Monetary Occasions.
Briggs additionally pointed to a booming marketplace for bulk buy annuities, by which corporations switch their outlined profit pension schemes to insurers akin to Phoenix, spurred by rising rates of interest.
Increased rates of interest scale back the current worth of the schemes’ future liabilities, and so make pension switch offers extra inexpensive for corporations. In accordance with consultants Lane Clark & Peacock, there was a file quantity of offers within the first half of the 12 months.
Briggs was additionally optimistic concerning 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 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 recent 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 mentioned the determine for the total 12 months could be on the high 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 normal.
Phoenix shares rose by slightly below 1 per cent in early buying and selling on Monday.