Royal London Maintain Position Among Top With-Profits Payouts 2008

TEP - 7 April 2009

Royal London, the UK's largest mutual life and pensions company, has today announced bonuses for 2008 on with profits policies in the Royal London Long Term Fund and in the closed Scottish Life Fund3.

With effect from 1 January 2009:

The benchmark 25-year payout on a Royal London £50 per month 25-year with profits endowment maturing on 1 January 2009 is £43,2381 an annualised return of 7.6%, representing a real2 return of 4.4% p.a.

The payout on maturity of a Scottish Life3 £50 per month
25-year with profits endowment is £32,4521 an annualised return of 5.7%, representing a real2 return of 2.6%.p.a.

Commenting on the announcement Royal London Group Finance Director Stephen Shone said:

"Policyholders in the Royal London Fund continue to enjoy some of the best payouts among the major providers in the industry.

Comparative Payouts

The following table, taken from the figures contained in other companies' own press releases, confirms that Royal London customers receive some of the highest payouts among the major providers in the industry.  It shows comparative payouts on the benchmark 25-year £50 per month endowment savings policy.

Parent Co.

Brand/Original Insurer

2009

Aviva

CGNU including GA

£43,368

Royal London

Royal London

£43,238

Aviva

Commercial Union

£38,123

Legal & General

Legal & General

£37,594***

Aviva

Norwich Union

£36,038

Standard Life

Standard Life

£32,534*

Royal London

Scottish Life

£32,452

Scottish Widows

Scottish Widows

£31,662**

Friends Provident

Main Series

£29,184

*maturity value as at 27 January 2009

**maturity value as at 1 February 2009

***maturity value as at 1 March 2009

all other figures quoted are as at 1 January 2009

(Source: Royal London and companies' own press releases for all companies with over £10bn funds under management.  This list only includes companies which have announced a payout on their 25-year conventional with profits endowment policies.)

Stephen Shone added:

"We believe that for the long-term investor the fundamental argument for investing in real assets remains strong.  Over the long term, real assets - such as equities and commercial property - have delivered above inflation returns for investors.  Today's results show that the annualised return on a Royal London 25-year with profits endowment is 7.6%.  This represents an annualised real rate of return (over and above inflation) of 4.4%.  And for a similar Scottish Life policy the annualised return was 5.7%, with a real rate of return of 2.6%.

"The smoothing of returns has always been an important feature of with profits investment and can be especially valuable in times of market volatility.  In our with profits funds, diversified investment portfolios and, where appropriate, the smoothing of returns, helped cushion payouts from the worst impact of the market falls.  The return in the Royal London Fund during 2008 was -16.3% and in the Scottish Life Fund was -4.6%.  These figures compare with a fall of 29.9% in the FTSE All Share Total Return Index over the year.

"In the Royal London Fund, our long term policy is to bring payouts gradually into line with asset share, as we state in our Principles & Practices of Financial Management (PPFM).  However, the sharp falls in the value of equities and property over the course of last year, and the effects of smoothing, mean that the gap between asset values and actual payouts has actually widened when compared with last year's announcement.  For the Scottish Life Fund, payouts for maturing policies are already maintained close to asset share.  In the current economic situation, we will of course monitor the position of the with profits funds on a regular basis, and undertake more frequent reviews of final bonus rates, to ensure fair treatment for all policyholders."