Friends cuts endowment bonuses

Click to follow

Friends Provident, the recently demutualised life assurer, yesterday warned home owners that the current round of cuts in mortgage endowment bonuses may not be the last.

The warning came as Friends joined the growing number of insurers to cut its bonuses. Friends said the final payout on a 25-year endowment would come down from £93,145 to £77,096 if it matures this year compared with last.

Bonuses paid on business which is still in force are also being reduced. Friends will pay an annual bonus of 4.25 per cent on unitised with-profits products, down from 4.75 per cent.

Friends said in a statement: "The negative investment returns experienced in 2000 and 2001 have still not been fully reflected in payout levels. As a result, unless there is significant growth in equity and property values, further reductions are likely."

Keith Satchell, the Friends chief executive, said one factor was the adverse affect of the collapse of Equitable Life last year. "A lot of business moved to other providers but we weren't really in a position to take advantage of it because we were in the middle of demutualisation," he said.

The company did see a rise in group pensions, which it is focusing on as a way to grow its business. Group pension sales increased by 48 per cent to £140m.

Friends shares rose 11.75p to 187p on relief it did not follow CGNU and other insurers in cutting its dividend.