Dame Amanda Blanc, chief executive of insurer Aviva, has directly urged Chancellor John Healey to avoid "flying kites" with prospective policies ahead of the October Budget, following last year's speculation about pension changes that triggered a surge in early withdrawals.
The warning came as Aviva reported a 24% rise in operating profits to £1.33 billion for the six months to June 30, beating expectations, and detailed progress on its £3.7 billion acquisition of Direct Line.
Plea to end pre-Budget speculation
Speaking after an event where she met the Chancellor, Dame Amanda said she made the plea to prevent policyholders from making rash decisions based on rumour. Last year, widespread reports that the UK Government might cut or restrict the 25% tax-free pension lump sum led to a significant amount of money being withdrawn from pensions before the autumn Budget.
"We do not want to see new things every week in the press around what might happen in the run-up to the budget," she said. "That is not very helpful, because what we do not want is for customers to make decisions that they will regret in the long run when policies are not changed."
Former Chancellor Rachel Reeves ultimately did not alter the tax-free lump sum rules at last autumn's fiscal event. Dame Amanda noted that customers would have been better to wait and see what the Government was going to do, adding: "Once you've made the decision to take your tax-free lump sum, you cannot reverse the decision."
Commitment from the Chancellor
Dame Amanda said Mr Healey had made a commitment in person at the recent event not to pre-brief on possible policy changes ahead of the Budget, which is scheduled for October 28. She also backed wider industry calls for the Government not to alter the tax-free lump sum allowances.
"We would definitely concur that it's something that shouldn't be touched," she said. She added that the government should be "encouraging people to save into their pension" and not "double-taxing people".
A Treasury spokesperson responded: "The Chancellor is fully focused on his priorities, to boost business, help with the cost of living and support people in every postcode. As has always been the case, the Chancellor will set out decisions at fiscal events, rather than routinely commenting on rumour, speculation or proposals."
Aviva's half-year results and Direct Line integration
The budget plea came as Aviva posted better-than-expected half-year earnings. The FTSE 100 firm reported a 24% surge in operating profits to £1.33 billion for the six months to June 30, and said it had already started to turn around performance at Direct Line following the acquisition in July last year, boosting price comparison website sales.
Dame Amanda said: "We are making very good progress with the integration of Direct Line. We have quickly improved Direct Line's profitability, grown price comparison website sales and maintained excellent levels of customer service. We are well on track to deliver all the financial benefits of the acquisition."
Aviva revealed in November last year it was doubling aims for cost savings following the Direct Line deal, having met the £100m original cost-saving target ahead of plan. The firm now expects to strip out £225m in costs by 2028 following the deal, though it said at the time this was not set to involve further job cuts. Aviva had already signalled in December that up to 2,300 jobs could go under the cost-cutting plans.
On a bottom-line basis, interim profits nearly halved to £418m from £819m a year earlier, due to a hit from hedging for interest rate and equity exposures, as well as Direct Line integration and restructuring costs. Aviva also lowered the outlook for its health division, saying it now expects the division to deliver full-year operating profit of £90 million compared with its previous guidance for around £100m, due to "slowing market growth" in consumer and small business markets, according to Aviva.
