Life Insurance  

Royal London considers annuities change

Mr Evans said while Royal London customers are offered either a special rate on a Prudential annuity or the open market option at retirement, Royal Liver customers are only given the market option.

He said Royal London does not provide annuities, but instead its customers are offered a preferential rate over and above the rate Pru offers to people coming to them within the Omo.

However, as Royal Liver was not part of the business at the time of the deal, it does not apply to them.

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Mr Evans said: “We have had discussions about this. At the time of the original arrangements with Prudential, Royal Liver customers were not on board as potential annuitants. Instead what they get is the open market option, unless it is a small fund, in which case they will have the opportunity to commute.”

Asked if this put Royal Liver customers at a disadvantage, he said: “I would argue their arrangements are exactly the same as before we took over the book

“One could argue they could get a better deal going through the open market route

“We will look to see if that will continue.”

A letter, seen by Financial Adviser, from Royal London Plus, to a Royal Liver customer, said: “We do not provide annuities for Royal Liver pension policies. This means you will need to use your pension fund to buy an annuity from another pension provider.”

He said it was difficult to calculate if Royal Liver customers were getting the equivalent rate as there were so many variables when applying for an annuity.

Adviser view

David Trenner, technical director for Glasgow-based Intelligent Pensions, said: “The default should be the open market option. Insurance companies have to either say they want the annuity business or say they are not competitive and push people to the open market option.”

Background

Royal London acquired Royal Liver, the 162-year-old mutual, in 2011 creating a business with assets of about £42.3bn and 5.4m members.

Talks between the Royal London and Royal Liver broke down in April 2007 when the board of Royal Liver decided it was better off pursuing an independent strategy.

It is not the first legacy issue that Royal London has faced with the business.

Last year it reached a confidential settlement with Utility Capital Management regarding a dispute over former Royal Liver finance director George McGregor.

It comes after Royal London had said it may seek to launch legal action to recover millions of pounds in losses related to £3.6m unauthorised payments sanctioned by Mr McGregor, to other companies.