Pru cuts costs of pensions to less than 1%

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The Independent Online

The Prudential, the life insurance group, yesterday announced it was following rival Standard Life and cutting pension charges to below 1 per cent for all pensioners as of next April.

The Prudential, the life insurance group, yesterday announced it was following rival Standard Life and cutting pension charges to below 1 per cent for all pensioners as of next April.

Jonathan Bloomer chief executive said that having taken out 20 per cent of its cost base in 18 months the price cuts would have no material impact on the profitability of the group.

"It is not as though we are currently charging 2 or 3 per cent. Our rates are about 1.2 or 1.3 per cent at present. Cutting charges to all pensioners and not just stakeholders to less than 1 per cent seemed like the fair and sensible thing to do."

The Prudential has around 1.2m pension customers.

Yesterday's decision reflects the growing competitive pressures bearing down on the life and pensions industry ahead of the introduction of low cost stakeholder pensions next April.

CGNU, which is relaunching its Norwich Union brand in the UK next week, has also announced that it intends to cut pensions charges across-the-board and not just for new stakeholder pensions.

The Prudential said yesterday that the UK market for life and pension products remains tough with customers holding back ahead of the April 2001 deadline. UK premium income was 21 per cent down at £5.8bn at the nine-month stage on the same period in 1999, despite a strong turnaround at M&G, the group's unit trust operation in the third quarter. Sales were down 25 per cent at the half year.

Prudential shares fell 16p to 889p. The stock has been one of the sector's worst performers this year. Mr Bloomer insisted that in the current competitive climate, he was not going to chase volume at the expense of profits. The group is instead concentrating on cutting costs at home while expanding in Asia and the United States., where, he says, competition is less fierce. International sales accounted for 53 per cent of the total this time, up from 40 per cent at this stage last year. Total group sales were up 2 per cent at £9.8bn

The group recently acquired a US listing and is actively looking for an acquisition there. The Prudential is seen as the favourite to take over Equitable Life, the life insurer.

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