Bonus Rate increase on Royal London with-profit endowments

10 April 2008 / by Sharon Bratley
Royal London, the UK’s largest mutual pension and investment company, has increased final bonus rates on some of its with-profits endowment policies for 2007 to 25 per cent..

In stark contrast to other insurance companies, like Scottish Widows, Friends Provident and Norwich Union who have all declared reduced annual bonuses for with-profit endowment policyholders, Royal London - which includes Scottish Life, Bright Grey and Royal London Assurance - has been able to increase the bonus rates on some of its policies.

The final bonus rate of Royal London's 10 year regular premium endowments has increased by 13.9 per cent to 25 per cent, while the payout on a £50 a month, 25 year endowment maturing is £48,773; this represents an annualised investment return of 8.4 per cent or in real terms, taking into account the effects of inflation, 4.9 per cent.

For pension plans, final bonuses have increased across the board so that for a 10 year pension plan, the final bonus has increased from 6.8 per cent to 9.1 per cent and for a 25 year term pension policy, the final bonus has increased from 87.3 per cent to 88.7 per cent.

“The result of the declaration is that Royal London customers continue to enjoy some excellent payouts," said Group Finance Director Stephen Shore

"The investment outlook continues to be dominated by low inflation and interest rates. I expect that the future headline returns on investments will be comparatively low by the standards of the last 25 or 30 years."

Nevertheless, says Mr Shore, the arguments for investing in real assets over the long term remain strong.

"Over the long term, real assets – such as those backing our with profit fund – have delivered above inflation returns for investors," he said.

As a mutual insurer, Royal London does not have any shareholders; it is owned by its with profit policyholders.

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