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Royal London customers to get a cut of firm’s profits

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Mutual Royal London has announced a new profit sharing scheme to allow pension customers a share in the financial success of the business.

The firm said the ProfitShare scheme, which will launch in January 2016, will be available to new customers buying a unit-linked pension plan and to existing unit-linked customers who have set-up a pension plan since 1 July 2001.

Unit-linked customers buy units in a pooled fund rather than invest directly in a share or bond.

Royal London estimates that 600,000 existing pension customers will immediately benefit and over the next five years 400,000 new pensions customers will be eligible to participate in the scheme.

It said it is the first customer-owned life, pensions and investment provider to enable customers to share in the profits of the company in this way.

Phil Loney, chief executive of Royal London, said: “As a mutual company we want to ensure that our customers and members have the best outcomes and  experience, and we wanted to find a way for those members of Royal London who don’t invest in our With Profits fund to also share in the profits of our business.

“Our innovative approach will significantly increase the number of Royal London customers who will see their savings increase through sharing in our profits and will further enhance our already strong competitive position in the pension and drawdown markets.

“It also sends a strong signal that Royal London remains a robust, independent, customer-owned organisation with our customers’ interests at the heart of everything we do.”

How ProfitShare will work

From the start of 2016 all new Royal London Workplace Individual Pension and Drawdown policies will share in profits, plus all existing unit-linked Royal London Workplace, Personal Pension and Drawdown policies, taken out since 1 July 2001.

Royal London will then review its financial strength and performance at the end of 2016, and each subsequent year, to decide whether a ProfitShare may be awarded.

Customers will then qualify to receive any unit-linked ProfitShare allocation awarded, in April the following year, provided their plan is still in force. So the first award will be made in April 2017.

Based on previous experience and future business plans the firm said its aim is to award a ProfitShare of between 0.15% – 0.25% of the unit-linked value of the qualifying customer’s plan.

There is no guarantee that ProfitShare will be awarded every year as this depends on the overall success of Royal London and the performance of financial markets.

However, once a ProfitShare amount has been allocated to a qualifying customer’s plan it will not be taken away.

The ProfitShare does not count as a contribution and so does not reduce the level of tax free contributions that customers can make to their pension plan each year.

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