Old Mutual Wealth dives after it slashes exit penalties for legacy insurance customers

OLD Mutual Wealth suffered a dent to profits after slashing exit penalties for retirees taking money out of old insurance policies.

The firm — which is set to float on the stock market after a demerger from Anglo-African parent Old Mutual — was one of six life insurers mentioned by watchdog the Financial Conduct Authority in March for potentially mistreating long-standing customers.

Old Mutual subsequently slashed exit charges to 1% from 5% for customers aged over 55, bringing it in line with FCA recommendations.

The reduction cost the group £21 million in charges for the six months ending June, helping reduce operating profits 31% to £104 million from £151 million. Profits dropped by 22% to £708 million.

Chief executive Paul Feeney said: “We took a very deliberate decision to reduce exit charges to no more than 1%. The vast majority of customers will pay nothing. We didn’t have to do it but the FCA is liaising with the industry and we felt we should the right thing and get ahead of it.”

People benefiting will be those sold insurance policies decades ago by Skandia, a Swedish insurance firm selling policies in the UK from 1979 onwards, It was bought by Old Mutual in 2006.