From January next year, in addition to the existing With Profits allocations, a new ProfitShare amount will be awarded to any new customers buying a unit-linked pension plan and to existing unit-linked customers who have set-up a unit-linked pension plan since 1 July 2001. This will include all those customers who have been automatically enrolled into a workplace pension.
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 ProfitShare arrangements.
Since the introduction of profit sharing arrangements for its With Profits customers in 2007, savings of existing With Profits customers have been boosted by over £460m in total.
Royal London aims to award a ProfitShare of between 0.15% – 0.25% of the unit-linked value of the qualifying customer’s plan. The amount will be added as a separate ProfitShare account within the customers plan, invested in the same investment choices as the main plan. 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.
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.
“The introduction of ProfitShare is fantastic news as it will help to enhance the future retirement saving of our customers. The research findings in our recent Pensions Through The Ages report worryingly highlighted just how many of today’s UK population could face retirement in poverty. Encouragingly the results also show that 61% of those in defined contribution schemes across all age groups surveyed, had been auto-enrolled.
"These savers currently benefit from the contributions made by their employers, and now, if they are in a Royal London pension scheme they know that their savings will also be boosted by our unique ProfitShare initiative. We are only able to offer ProfitShare because we are a member-owned company, committed to helping our customers meet their long-term goals.”
