GOVT PENSION SCHEMES CREDIT NEGATIVE FOR UK LIFE ASSURERS: MOODY'S

The decision by the UK government to remove many of the restrictions that currently stop the National Employment Savings Trust (NEST) from competing fully with UK life assurers would be removed from 2017 could lead to credit-negative implications for UK life assurers, according to an outlook from rating agency Moody's. The planned changes will permit individuals to increase above the current cap of £4,500 ($6,750) their annual savings into NEST. Savers will also be allowed to transfer existing pension assets to or from NEST. Moody's said that when the restrictions are removed, NEST will probably receive funds that would have flowed to insurers. "Equally, the ability to transfer assets onto the NEST platform from insurers’ balance sheets will likely lead to net outflows of pension assets from UK life insurers", the agency said. In addition, Moody's predicted that the lower charges on NEST products would probably make insurers lower their own charges. As partial compensation, Moody's noted that the target market for NEST remains low-to-moderate-income groups, so it is unclear how many customers could save more than the current cap. "Finally, we expect that the key industry players will continue to try to differentiate themselves through enhanced service offerings, which may offset the cost advantages NEST can provide", said Moody's.