AEGON AROUND THE WORLD AEGON UNITED KINGDOM AEGON GROUP ANNUAL REPORT 2003 54 PENSIONS  PRODUCTS AND DISTRIBUTION GROUP PENSIONS GENERAL HISTORY The principal holding company within the AEGON UK group of companies is AEGON UK plc (AEGON UK), incorporated as a public limited company under the Companies Act 1985.  As a result of the launch of the stakeholder pensions product, many other pensions products were pressured to reduce charges, which led to a high level of sales activity in terms of both new schemes and transfers of existing schemes. It has also been necessary to protect existing business by reducing the charge structure in force to some extent. There is expected to be potential for some relaxation of price cap levels if government targets for higher private provision are to be met. During late 2002 and 2003, the British government announced a change to many aspects of pension legislation and taxation. The most significant aspect related to the introduction of a simpler and unified tax regime, which will apply to all types of pension arrangements. The details are still emerging, but it is currently anticipated that implementation will occur in April 2005. The changes will impact all UK pension providers requiring reviews of product ranges and supporting infrastructure. Sales of more specialized pensions have also grown significantly over the last few years, particularly in the area of income drawdown and phased retirement products which allow individuals up to the age of 75 to access part of their pension income without having to fully purchase an annuity until a later date. The sale of group pensions is the primary focus of Scottish Equitable plc (SE). These are pension funds for the employees of corporate customers and cover a range of benefit options, which are predominantly defined contribution. At retirement, the accumulated pension fund is used to purchase an annuity once any cash (within limits) has been taken. SE also sells and administers defined benefit pensions. Although the market for new schemes of this type of product has decreased in recent years, opportunities remain to take over the administration of these schemes. Group pension products include flexible features, such as access to a range of both internal and external funds, with premiums primarily paid monthly based on a pre-agreed proportion of salary costs. Single premium transfers are also common following the initial sale. Technology plays an increasingly important role in both the initial sale and the ongoing provision of services related to these products. SE has developed a market-leading technology solution called SmartScheme, which allows the customer and the intermediary to interact with SE online throughout the process. Most of AEGON UK’s products provide policy charges, which increasingly relate to a management charge for funds under management. Older contracts continue to have other policy- based or transaction-based charges, such as bid/offer spread. The pensions market experienced significant decline in gross sales during 2003 of government-led products with a 1% annual management charge limit which resulted from lower consumer confidence and economic outlook. AEGON UK is a major financial services organization specializing in the pensions, investments and protection markets. Over half of AEGON UK’s sales relate to corporate business. AEGON UK increased its position in 2003 in the independent financial advisor channel. In addition to manufacturing these life and pension products, AEGON UK also has a growing asset management business and administrative services business and has recently acquired distribution businesses. The primary insurance subsidiaries in the United Kingdom are: •  AEGON UK Distribution Holdings Ltd, London. •  HS Administrative Services Ltd, Chester •  AEGON Asset Management UK plc, London •  Guardian Pensions Management Ltd, Lytham St Annes •  Guardian Linked Life Assurance Ltd, Lytham St Annes •  Guardian Assurance plc, Lytham St Annes •  Scottish Equitable plc, Edinburgh