Royal London Endowments

Royal London was founded in 1861 as a friendly society. It dedicated itself to serving the interests of its members and securing their financial security and became a mutual life insurance company in the year of 1908.

The Royal London postal address is: The Royal London Mutual Insurance Society Limited. Registered Office: 55 Gracechurch Street, London EC3V 0RL

Below is information concerning Royal London Endowments and their responses to questions raised as a result of F.S.A consultation paper 106.

The Financial Services Authority published a document concerning trading an endowment policy which resulted in the Royal London publishing a response to certain questions asked.

As the responses may be difficult to find using the normal search engines, the questions and responses are pasted below:

COMMENTS FROM ROYAL LONDON ON FSA CONSULTATION PAPER 106:

DISCLOSURE: TRADING AN ENDOWMENT POLICY AND BUYING A PENSION ANNUITY


Question 1

Do you have any comments on the desirability or other wise of the FSA enshrining in its rules the existing guidance issued by the PIA?

Royal London Comment - "We would support the extension of good practice throughout the industry. We have adopted the guidance already issued and found it to be in customers’ interests to outline their options including details of market makers and auctioneers in the TEP market."
 

Question 2

Are there grounds for the FSA to review the traded endowment market in more depth?

Royal London Comment - "We are not aware of any market inefficiencies which would warrant an FSA review of the traded endowment market."


Questions 3

Do you agree that it would be appropriate for the FSA to introduce rules requiring firms to inform prospective annuitants that they can shop around for the best annuity deal?


Royal London Comment - "Royal London currently informs prospective annuitants of their options. We would support this practice being adopted across the industry.

We note that FSA is not proposing to be proscriptive about the form of notification provided to prospective annuitants. We would not support any statutory notice which implies that the “best” annuity deal is that which provides the highest pension income. The best annuity deal is highly dependent on individual circumstances with some annuitants preferring features such as guarantees, inflation proofing or spouses pension over a high monetary value at outset."



Question 5

Do you agree with our conclusion not to require life offices to tell all policyholders regardless of the type of policy held, who are about to surrender their policy, about the secondary market.


Royal London Comment - "Royal London’s current policy is to inform all customers seeking to surrender their endowment of the options they have including the possibility of trading the endowments. We would prefer to include all policies where surrender is being considered rather than to exercise judgement over the types of policy that are likely to appeal to the secondary market. Such judgement calls are likely to be highly subjective and require a detailed knowledge of the workings of a rapidly changing market.

We accept that there is a possibility that some customers may have their hopes raised needlessly because their particular policy is not tradable in the secondary market. Nonetheless it is better to tell all customers about all the potential options rather than run the risk of omitting some whom may have benefited from trading their policy."

Question 7

Open market for annuities: Do you agree that this is the information policyholders need to know and which would be reasonable to require to be given to them?


Royal London Comment - "There are some practical issues with the proposals.

A number of providers (Royal London among them) offer flexible pension contracts that do not have a Normal Retirement Date (NRD) which is fixed at outset. Typically with such contracts the policyholder can vest (or partially vest) the plan at any point between ages 50 and 75. In these circumstances the provider will not know when the policyholder intends to retire and, therefore, cannot know when the 4-month notice should be sent.

Equally there is a risk of raising false expectations with some prospective annuitants with small funds. In some cases the prospective annuitant will not be able to find an insurer willing to accept their OMO. Likewise many IFAs will not be willing to provide advice to prospective annuitants if the vesting fund falls below their minimum levels. While we support the promotion of the open market option not everyone will be able to benefit."