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Royal London slashes equities and payouts

Royal London Group has sold approximately £3bn in equities and is slashing with-profits bonuses by up to 24 per cent for Scottish Life compared with 19 per cent for Royal London policyholders.

The cuts have led IFAs to question Royal London&#39s commitment to existing policyholders in the closed Scottish Life with-profits fund.

The company now admits it will be seeking a solvency waiver. It has declared a free asset ratio of 7.6 per cent although without future profits, this is 3 per cent below the 4 per cent solvency hurdle.

Scottish Life&#39s equity holdings have been cut to 24 per cent at the end of 2002 from 59 per cent the previous year.

Royal London&#39s equity weighting has fallen to 44 per cent from 64 per cent.

A Scottish Life 25-year £50 per month endowment will now pay out £72,323 compared with £94,738 last year. The same endowment with Royal London will now be worth £87,543 compared with £107,714 in 2002.

Royal London head of corporate communications Stephen Humphries says: “We will in all probability apply for the solvency wai-ver as it gives us additional flexibility. We look to balance the security of the fund against future returns.”

Chartwell director Patrick Connolly says: “To be down in the 20 per cent area for equities is rare and does not hold up much hope for Scottish Life policyholders.

“It looks as though Royal London has said it is not worth taking an equity risk for Scottish Life.”

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