17 October 2006
A new report from Higham Dunnett Shaw claims that pension new
business is substantially lower than figures suggest, and that
pension companies are spending much more money on attracting new
customers than they are on keeping current customers satisfied.
The report from Higham Dunnett Shaw claims that headline figures
on market growth are masking an "unsustainable" issue, with high
levels of churning. According to the report, for every £1
reported by the industry as new business, at least 70 pence is
"lost" through existing investors merely switching providers. This
means that the UK life and pensions companies are often not
reporting new business but rather the recycling of existing
business in the industry.
Mark Richardson, head of customer management services at Higham
Dunnett Shaw, said: "The industry as a whole is suffering from a
shortfall in real growth because it is spending considerably more
money on attracting customers than on keeping them.
"We are rapidly approaching a scenario whereby as one customer
comes through the door, another one leaves."
He concluded by saying that the cost of the business churn will
affect the finances of life offices across the country, before
being transferred onto the investor.
