Friends Provident cuts 18% from bonuses on maturing policies

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The Independent Online

Friends Provident, the UK life and pensions group, announced another set of bonus cuts for its with-profits policyholders yesterday, reducing payouts on 25-year policies which are now maturing by almost 18 per cent compared with the same time a year ago.

Friends Provident, the UK life and pensions group, announced another set of bonus cuts for its with-profits policyholders yesterday, reducing payouts on 25-year policies which are now maturing by almost 18 per cent compared with the same time a year ago.

Annual bonus rates on its main with-profits funds were marked down by 4 per cent on average, in spite of the fund returning more than 10 per cent for the first time in five years. Investors in unitised with-profits products fared better, with bonus rates increased by between 5 and 12.5 per cent.

The cuts were in line with most other life insurers, which failed to make sufficient capital reserves when markets were strong to compensate for the bear market between 2000 and 2003. Bonus rates are likely to continue falling for the next few years.

Ben Gunn, the managing director of life and pensions for Friends, said: "Bonus rate changes continue to reflect the large fall in investment values between 2000 and 2002 and the general decline in expected long-term returns."

A statement from the company, headed by chief executive Keith Satchell, said: "Previous declarations have gradually reduced regular bonus rates and some further reductions have been necessary."

Shares in Friends fell 0.5p on the news, closing at 165.5p.

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