Investment - Articles - Royal London get green light by High Court over annuity plan


A plan by Royal London to tackle the issue of policyholders who throw away valuable ‘guaranteed annuity rates’ has taken a major step forward with approval by the High Court of the company’s approach. Royal London will now be writing formally to around 30,000 customers giving them the option of exchanging the guaranteed annuity rate attached to their pension policy for an uplift to the value of their policy.

 Since pension freedoms were introduced in 2015, pension providers have seen a big increase in the number of customers choosing to take their pension savings as cash rather than buying an annuity using the generous guaranteed rate which was offered when the product was sold. Across the industry roughly 3 in 5 policyholders with these guarantees are surrendering them because they prefer to withdraw their capital rather than buy an annuity.

 In order to protect these customers, Royal London has decided to give them the option of exchanging the guaranteed annuity rates attached to these policies with a substantial cash uplift. The amount of the uplift will depend on the terms of the individual policy and when it was taken out, but most uplifts are expected to be in the range 40-80%. Customers who wish to retain the guarantee will be free to opt to do so.

 A range of consumer safeguards have been in place throughout this process, including the appointment of an independent actuary to oversee the calculations and an initial round of contacts with affected policyholders to test appetite for the process. Nearly 4 in 5 policyholders affected who responded to the initial mailing said that they wanted the company to proceed with the offer.

 Now that the High Court has approved the plans in principle, affected policyholders will receive individualised mailings letting them know the amount by which their pension fund could be increased. A free guidance line is being set up to answer questions about the process and Royal London will also make a substantial contribution towards the costs of personalised financial advice to help policyholders decide the option which is right for them.

 Policyholders who do not choose to keep their guaranteed annuity rate will have the opportunity to vote on these proposals before a final court hearing in November to sign off the process. Affected policies will be uplifted in December 2018.

 Commenting, Steve Webb, Director of Policy at Royal London said: ‘The High Court’s decision is a welcome step forward in the process of looking after our former Scottish Life customers who hold these Guaranteed Annuity Rate products. We have been increasingly concerned to see the proportion of them throwing away these valuable guarantees since the introduction of pension freedoms. With the uplift that we are offering, customers will be able to retain the value of the guarantees attached to their policies whilst also enjoying the flexibility of pension freedoms. And those customers who want to keep their guaranteed annuity rate option will be free to do so.’

Back to Index


Similar News to this Story

What is the deal with Brexit
After nearly two years of painful and protracted negotiations, the UK government and the European Union have finally agreed a text on the EU – UK With
Marsh to form new business called Marsh JLT Specialty
Marsh announced the formation of Marsh-JLT Specialty. Marsh-JLT Specialty will be a new specialty business within Marsh that combines the specialty te
The most influential capital on the planet revealed
The Asset Owner 100 – the world’s 100 biggest asset owners – account for around US$19 trillion, or nearly 35% of capital held by all asset owners glob

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.