More woe for UK investors as bonuses cut
More bad news was heaped on beleaguered investors today when the UK’s largest life insurer announced it was cutting the bonuses on its long-term savings policies.
Norwich Union, which is part of insurance giant Aviva, said it was reducing the final bonus paid on its with-profits policies by around 5% from August 1.
The policies, which aim to smooth out stock market volatility during the course of the investment, are taken out as mortgage endowments, private pensions and long-term investments.
Norwich Union is reducing the regular bonus rates on its unitised with-profits policies by 0.5% to 3.75% for life business, 4.25% for stakeholders and 4.75% for other pensions.
It is also considering similar reductions for conventional with-profits business.
The group blamed the move on continuing stock market volatility, with the FTSE 100 Index falling by 25% so far this year, following drops of 16% in 2001 and 10% in 2000.
It said this had led to the value of its with-profits fund falling by 8.3% so far this year, though it added that someone with a 25-year mortgage endowment policy would still have had an average return of 11.1% a year.
But the move is further bad news for people who have endowment policies with the group, more than half of whom are expected to face a shortfall between the value of their policy and their mortgage debt.
