Former Scottish Life policyholders who have policies with guaranteed annuity rates (GARs) have voted overwhelmingly to accept Royal London’s recent offer of a pension uplift in exchange for their guaranteed annuity.
Just under 15,000 policyholders – around half the total population - replied to a recent mailing offering them an uplift and of these more than two thirds (10,546) accepted the offer whilst just under a third (4,207) opted to retain their current guarantees. Policy holders who accepted the offer and others who have not actively opted out have this weekend (7-9 December) received an average 60% uplift on their pot, with the average policyholder receiving an additional £20,000 in exchange for giving up their guaranteed annuity. The total value of the uplift is around £466 million.
Royal London launched the initiative in response to concerns that a majority of policy holders were throwing away their guaranteed annuity rates at retirement in order to access their pension cash under the pension freedoms introduced in 2015. During the process, which began earlier this year, the company provided a free guidance line for members as well as access to heavily subsidised financial advice to help members make the choice that was right for them. There was also an extensive court clearance process, involvement of regulators and the use of an independent actuary to ensure that policy holders were treated fairly.
Commenting, Steve Webb, Director of Policy at Royal London said:
‘This has been a long and careful process designed to give members the option of exchanging their guaranteed annuity for an uplift in the value of their pension fund. The offer clearly struck a chord with members with more than two thirds of those who responded actively opting to receive an uplift. Compared with a situation where a majority of policy holders are throwing away the value of their guarantees in order to access their pension fund, this is a much more satisfactory outcome, especially since those whose preference is to retain their guarantees have been able to opt to do so’.
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About Royal London
Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June.
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