Norwich Union cuts with-profit payouts again

Click to follow
The Independent Online

With-profits customers at Norwich Union, the UK insurer owned by Aviva, once again saw the value of their policies fall last year, with many endowments and pensions maturing in 2006 set to be worth as much as 4.3 per cent less than those cashed in a year ago.

Making its annual with-profits announcement, the group said the majority of final bonus rates had increased over the past year, adding that its rates remained competitive.

However, it conceded that the value of long-term policies was likely to continue to fall, in spite of a recent rally in the markets. It said this was because "our expectation of future investment returns has reduced". A 25-year £50 a month mortgage endowment policy which matures this year, for example, will now pay £50,295 against £52,576 a year ago.

On the positive side for investors, the company continued to cut its market value adjusters, meaning policyholders who cash in their investments will not be so heavily penalised.

John Lister, NU Life's chief actuary, said: "Following the increases in regular bonus rates on some products announced in 2005, an excellent investment return and a strong fund have enabled us to increase most final bonus rates and deliver good policyholder returns.

"The strength of the fund allows us to have a high proportion of policyholders' money invested in shares and property, which has clearly benefited policyholders in providing the near 18 per cent return. It also allows us to offer our customers valuable guarantees."