Aegon UK saw pre-tax profits crash by 86% to £12 million in the first half of 2013 compared with last year and underlying earnings fall by 9% to £43m - but chief executive Adrian Grace said the Edinburgh-based life insurance and pensions business is now strongly positioned for growth.

He said a 36% rise to £23m in core earnings between the first and second quarters and a 45% hike in sales showed that underlying growth was coming through, while the rapid growth of Aegon's platform offering and distribution deals with Mercer and Barclays showed its investment in new technology was paying off.

Mr Grace also warned that the success of automatic enrolment into pensions at work was under threat from the Government's ban on 'consultancy charging', which enabled employers to deduct the costs of professional advice from employee contributions.

He said this week's announcement that the Pensions Regulator was pursuing 89 firms which had failed to auto-enrol employees by their deadline could be the tip of the iceberg. "If we get into the middle of next year and that 89 becomes 1000 companies or more, what is going to happen?

"My view is they should allow some sort of consultancy charging. There is going to be a very big advice gap next year with people not taking advice, not getting the right solutions, and we'll have the next mis-selling scandal."

Mr Grace said pensions minister Steve Webb had made his decision and Aegon's advice had not prevailed, adding: "We should all be focused now on giving good advice. Advisors are the life-blood of the industry and if you start to cut them out, where is good advice going to come from?"

Aegon's advice was, however, heeded in the Government's decision to maintain restrictions on the default auto-enrolment provider Nest Corporation until 2017, despite calls from much of the industry and by consumer groups to allow Nest to compete fully sooner. Mr Grace said: "My whole concern is that we don't release the floodgates, and people get into the wrong solution."

Aegon UK's first-half profits were hit by a writedown of £18m on the sale of its IFA business Positive Solutions to Intrinsic, and by costs of £27m from closing its regional offices including the migration of platform servicing jobs from Bath to Edinburgh.

Positive Solutions and the group's other IFA network Origen made cumulative losses of £25m after the financial crash, though PosSol returned to profit last year. Now Origen is to be converted into a 'tied' adviser selling only Aegon's products.

Mr Grace said: "We are turning Origen into a single-tie to make it more focused on selling in the corporate space." It will now account for Origen in its pensions business, which saw first-half earnings fall from £18m last year to £5m.

Mr Grace said a "commission feeding frenzy" had marked the transition to fee-based advice this year. "Some players were paying what we think were higher than expected commission payments for business, some of which they took from us, and we decided not to play in some of that."

He said Aegon's platform was "a completely differentiated proposition from what everybody is doing in the market - that is why we are seeing volume growth".