Lloyds Banking Group has announced plans to increase its financial planning and retirement market by a million customers and increase its open book assets by £50bn in three years.

Publishing its full year results and strategic update today, 21 February, the group set out its plans it hopes to achieve by 2020. Towards the end of 2017, Lloyds announced the acquisition of Zurich’s workplace pensions and savings business, which has customers funds of £21bn and around 595,000 customers. In its full year report, it said the acquisition will enhance Scottish Widows’ current offering, giving a strong platform on which to develop the next stage of its strategy in financial planning and retirement.

In addition, Lloyds also posted strong results for its bulk annuity business; since entering the market in 2015, it has written £2.5bn in bulk annuity deals, of which £0.6bn was from 2017. It reported workplace planning and retirement customer assets under administration increased by 15 per cent to £43bn, reflecting net inflows and positive market movements.

Total life and pensions sales increased by 12 per cent, driven by 29 per cent increase across workplace, planning and retirement and protection. Lloyds said it was partly offset by lower bulk annuity sales as it has “maintained a strong pricing discipline whilst actively quoting in a very competitive market”.

In regards to its own pension scheme, Lloyds reported a deficit of £7.3bn as at 31 December 2016, compared to £5.2bn at 30 June 2014. It said the increase was mainly driven by lower gilt yields, offset primarily by hedging and asset returns. Under the previous recovery plans, deficit contributions were committed of £0.3bn in 2018 and 2019 and c.£0.9bn per annum thereafter.

However, under the new recovery plans, deficit contributions of £0.4bn are payable in 2018, £0.6bn in 2019, £0.8bn in 2020 and £1.3bn per annum from 2021 to 2024. The group also continues to provide security to these pension schemes, with corporate guarantees and collateral pledged, while also making additional annual contributions for future service.

All of the group's DB pension schemes will be located within the ring-fenced bank and these revised contributions are included in the group's latest capital guidance.

Overall, Lloyds posted an 8 per cent rise in underlying profit to £8,493m, with revenues rising 6 per cent to £18,525m in 2017. The bank increased its ordinary dividend by 20 per cent to 3.05p per share. It has ditched the special dividend in favour of a share buyback of up to £1bn, equivalent to 1.4 p per share. Shares rose 1.5 per cent in early morning trading.

Commenting, Hargreaves Lansdown senior analyst Laith Khalaf said: “There’s a lot to like in Lloyds’ numbers, with profits rising, costs under control, and prodigious amounts of cash being thrown off to shareholders. The Bank of England can take its fair share of credit for Lloyds’s profits, as rising interest rates have delivered a boost to the top line at Lloyds.

“Lloyds is also looking at expanding into the financial planning and retirement market, and is targeting one million new pension customers by 2020. The government’s auto-enrolment programme is now largely in the rear view mirror, which means Lloyds will have to pinch these new customers off someone else, so it will have to sharpen up its toolkit. One would expect Scottish Widows to play a pivotal role in this pensions land grab, which lends some context to the recently announced prospective withdrawal of £109bn of assets from Standard Life Aberdeen.”

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