Your Money: Don't storm out of Standard Life

Standard Life's decision to cut bonus rates on its with-profits policies has come as no surprise; the company warned it would be necessary earlier this month.

But policyholders, who have now endured the fifth cut in their bonuses in two years, may be worried nevertheless. Assets in the with-profits fund actually rose by 14 per cent last year, yet bonuses have still been slashed. And Standard Life is not out of the woods: after talks with the Financial Services Authority on how it calculates its financial strength, it is currently considering demutualisation.

The problem for Standard Life customers is that while the stock market has picked up, it has not done so enough yet to clear three years of negative returns. They have invested in a with-profits fund, which uses "smoothing" to ensure policyholders get something in the bad times. Bonuses were paid in those lean years, and investors are now paying the price.

Standard Life is not alone: AXA Sun Life, Scottish Widows and Norwich Union have all made bonus cuts. Things may seem grim but policyholders should stick with the company, at least for now, and keep an eye on what happens.

Keep moving on ISAs

More and more of us are hunting around for the best investment plan or mortgage rather than taking what our bank has to offer. But we aren't so good at moving on again once that deal becomes less competitive.

Research from Intelligent Finance (IF), the internet bank, reveals that if you opted for one of the top 10 mini cash individual savings accounts (ISAs) in 1999, there's a strong chance it won't be so competitive any more. Just three of that original list would come in the top 10 today, and the average rate of interest paid on these ISAs has fallen by almost twice the drop in the Bank of England base rate.

Despite this, only 3 per cent of ISA holders have ever changed providers. That one in four don't even realise it is possible to switch may have something to do with this, as may a lack of awareness that if you do move cash from one account to another, it won't affect your ISA allowance for the current tax year.

IF has an interest in all this because it offers a cash ISA that guarantees to pay at least 0.3 per cent above the base rate until 31 January 2005. The current pay rate is 4.35 per cent.

From 2006 the Chancellor will reduce the maximum you can invest each year in a mini cash ISA from £3,000 to £1,000, and in a maxi equity ISA from £7,000 to £5,000. Before you lose part of your allowance, now is a good time to reassess ISA investments.

m.bien@independent.co.uk

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