Life office cuts policy payouts

Tunbridge Wells Equitable Friendly Society is cutting most of its payouts on with-profits endowment policies by more than 8 per cent. It still expects to retain its position among the top 10 as other life offices are also forced to reduce bonuses.

Chief executive Nick Morrell said: "It's been a grim year for investment returns, but when you take the average across the terms of the policies, you can see that they are good value."

The cut in the payout on a 10-year policy by 8.5 per cent brings the annual yield on premiums down from 12.68 per cent to 11.1 per cent. On a policy with premiums of £100 a year the annual bonuses are being cut by £26.93 to £654, and the terminal bonus by £147.10 to £261.88. The f inal payout is then made up to the total of £1,869.58 by the sum assured - £953 for a 29-year-old man.

Fifteen-year policy payouts are being cut by 8.32 per cent and 20-year policies by 8.1 per cent. For 25-year policies payouts are cut by 5.1 per cent, with the annual yield on these falling from 13.94 to 13.63 per cent.