30th January 2015
Insurer Legal & General has announced has announced the closure of its with-profits fund to new investors.
The with-profits fund will close tomorrow to new business but there will be no change to how it is managed and it will continue to allow investments for existing policyholders.
The fund is invested in a range of different assets, including UK and overseas equities, fixed interest and commercial property and the insurer said it would continue in its aim to ‘maximise returns for its members subject to an appropriate degree of investment risk’.
Jackie Noakes, managing director of mature savings at L&G, said the decision to close the fund was based on falling new business levels, partly due to the introduction of strict regulation for advisers, known as the retail distribution review (RDR), which banned commission.
‘We have seen a continued fall in investments into our with-profits fund, especially since the inception of the RDR,’ she said.
‘As these new business levels can no longer be defined as substantial, we have taken the decision to change the regulatory status of our fund to ‘closed’…we will continue to deliver active investment management in the best interests of our with-profits customers as you would expect from a leading with-profits provider. By actively investing in a broad spread of assets we aim to continue to deliver steady growth to our with-profits policyholders.’
The fund will accept investments into existing with-profits pensions, including new members to existing group person pensions.
The closing of the with-profits fund could be seen as an end of an era for investment. However, head of pensions research at Hargreaves Lansdown Tom McPhail pointed out that the government’s plans for ‘defined ambition’ schemes which smooth the risk of pension investing seem to imply the government and investment industry were not on the same page.
‘[Pensions minsiter] Steve Webb has created defined ambition pensions in the expectation that one day in the future demand for this type of product will re-emerge; for now it looks as if the pendulum is still swinging in the other direction,’ he said.