Royal London increases life and pensions business by 40 per cent as boss backs calls to reform tax relief rules

Phil Loney, chief executive of Royal London, the mutual which employs 1,100 in Scotland, has spoken out in support of calls for pensions tax relief to be limited for higher earners.

Mr Loney said he would support moves to limit the amount of relief provided for people who pay tax at higher rates, of up to 45 per cent.

“The critics of the perceived unfairness of the current system, where 75 per cent of tax relief goes to high and additional rate taxpayers, have won the intellectual argument,” he said.

Mr Loney added: “We don’t think there is a case for removing tax relief for higher and additional tax payers altogether. There should be some incentives for all to save. That is why we have come down in favour of a flat rate at about 30 per cent.”

His contribution came as Royal London revealed that last year saw it increase life and pensions business by 40 per cent to £6.7 billion on the industry standard measure in 2015, from £4.8 billion the preceding year.

The firm said it is continuing to benefit from pension reforms including by way of a surge in new drawdown business as customers plan to take advantage of the new freedom to dip into their pension pots from the age of 55.

Royal London said it had increased the present value of new drawdown business premiums by 67 per cent to £1.3 billion last year, while new group pensions business increased by 27 per cent annually to £2.8bn.

Meanwhile, new individual pensions business rose 39 per cent, to £1.9bn.

The firm also achieved strong growth in sales of workplace pensions on the back of the requirement for businesses to enrol employees in schemes.

As Chancellor George Osborne may be considering further big changes in next month’s Budget, Mr Loney also took the opportunity to underline his opposition to Treasury proposals to introduce ISA-style pensions which would not offer people tax relief on contributions while the incomes people eventually receive would be tax exempt.

He said savers would lose the certainty provided by the current system of providing tax relief on contributions made on to schemes and increases in their value.

They would need to believe that future generations of politicians will not renege on the deal and tax their savings when they come to withdraw them.

Mr Loney asked rhetorically: “Hands up anyone who really believes that?”